Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

PRIVATE BUSINESS

LETCHWORTH GARDEN CITY HERITAGE FOUNDATION BILL

Lords amendments agreed to.

Oral Answers to Questions — EMPLOYMENT

Manufacturing

Mr. Jacques Arnold: To ask the Secretary of State for Employment what are the latest figures for manufacturing employment. [16003]

The Secretary of State for Employment (Mr. Michael Portillo): Manufacturing employment in Great Britain rose by 8,000 in the latest month, to stand at 4.3 million in January 1995.

Mr. Arnold: Does my right hon. Friend agree that those figures are extremely encouraging? What would be the impact on that increase in manufacturing employment if the social chapter and other measures beloved of the Labour party were imposed on this country? How relevant does my right hon. Friend consider the recent statement of the president of Daimler-Benz in Germany that if the imposition of the social chapter were continued and extended, there would be no manufacturing employment left?

Mr. Portillo: I consider it a substantial advantage to manufacturing employment in the United Kingdom that we do not subscribe to the social chapter. It is clear that inward investors value our membership of the European Union, but consider it very important that the costs of the social chapter are not imposed on us. Our duty as politicians and legislators should be to make it easy for one person to give another a job, rather than to impose burdens that prevent employers from creating jobs.

Mr. Chidgey: Does the Secretary of State agree that a key factor in sustaining and, indeed, increasing employment in our manufacturing industries is the development of a highly trained and highly skilled work force, and that the modern apprenticeship schemes could well play an important role in that? Does the right hon. Gentleman also agree that engineering apprenticeships should take priority over training and enterprise council funding plans relating to other, more easily achievable apprenticeships, so that we can achieve an increased and sustainable work force in manufacturing industry in the long term?

Mr. Portillo: I am pleased to hear a tribute to the Government's modern apprenticeship initiative from an Opposition Member. It is indeed an important initiative, raising skills to a level that is vital in industry.
I think that all the apprenticeships should be rigorous. People should be expected to achieve standards of excellence in the modern apprenticeship programme, and in national vocational qualifications. I do not believe that I myself should choose between one sector and another, but I agree with the hon. Gentleman that engineering is an extremely important sector of British industry.

Ms Harman: Does the Secretary of State admit that the reason why people are so concerned about the loss of manufacturing jobs—40 per cent. have been lost since 1979—is not just unemployment, but the low pay that goes with it? Does he not recognise that when manufacturing jobs are lost, the new jobs that replace them are often low paid? One million people in this country earn less than £2.50 an hour. Is that not a disgrace, and does it not mean that the Tory party is the party of low pay?

Mr. Portillo: I know that the hon. Lady does her research very carefully. She will know that, between 1974 and 1979, 609,000 manufacturing jobs were lost. If she has some magic solution, why were manufacturing jobs lost when her party was last in power? Why is it that it is only under this Government that the number of manufacturing jobs is rising?
If the hon. Lady is worried about low pay—despite the fact that real living standards have risen dramatically under this Government—will she commit herself to the minimum wage level that the Labour party would propose? The trade unions are pushing her on that, and we are pushing her on that. The Labour party must now come clean and tell us. It wants to promise a minimum wage but it does not want to put a figure to it. That is a dishonest posture. She should be ashamed of it.

Mr. Streeter: Will my right hon. Friend join me in welcoming the 1,000 jobs announced yesterday in south Devon by the Canadian company Nortel? They were won in the face of strong opposition from the United States of America and Mexico. Is that not just a massive vote of confidence in the far south-west economy, but a reminder that the United Kingdom remains a paradise for inward investment?

Mr. Portillo: We remain a paradise for inward investment. The long-term nature of that company's commitment in Devon shows that a strong belief exists that the country will sustain a Conservative Government who will keep us out of the social chapter in the long term.

Young People

Mr. Flynn: To ask the Secretary of State for Employment what new proposals he has to increase the percentage of young people in full-time work.

The Parliamentary Under-Secretary of State for Employment (Mr. James Paice): We will continue with the policies that have reduced unemployment among young people under 25 by 200,000 in the past two years, and that give the United Kingdom an unemployment rate for that age group that is among the lowest in Europe.

Mr. Flynn: In the paradise of Britain in 1979, 66 per cent. of young people were in employment; the figure is


now less than 50 per cent., and three quarters of those people are in part-time, low-paid work. Is not the Minister ashamed that the deserted generation of young people suffer the daily rejection of unemployment or under-employment when they should be enjoying the best years of their lives? Is not the cruel choice for young people in Tory Britain to be fully educated and unemployed, to be fully qualified and partly employed, or, as is the case for 1 million people, to be in full-time work but earning part-time wages?

Mr. Paice: I am not sure whether the hon. Gentleman is casting doubt on the International Labour Organisation unemployment figures, which show that the unemployment rate for under 25s is 16 per cent., or whether he is somehow trying to use the percentage of young people in education. Of course, fewer people in that age group are in work than in 1979 because far more are staying on in education and going on to gain further qualifications. At present, 73 per cent. of 16-year-olds are staying in full-time education, compared with just 42 per cent. in 1979.

Sir Michael Neubert: Is not it the case that, were the UK to have the misfortune of a minimum wage, young people would be the first and the worst to suffer? Cannot that be seen by comparing our country, where we do not have a statutory minimum wage, with France and Spain, which do?

Mr. Paice: My hon. Friend is right. If one considers the youth unemployment statistics across Europe, a clear similarity exists between countries with high levels of youth unemployment and those with a statutory minimum wage. Compared with the youth unemployment level in the rest of the Europe, our level is exceptionally low. It stands at 16.5 per cent., whereas in Spain it is 38 per cent., in Italy 30 per cent., in Ireland 26 per cent., in France 23 per cent. and in Belgium 9.2 per cent. I could go on. The European average is 19.6 per cent.

Mr. McCartney: Perhaps the Minister would like to comment on the independent report that will be highlighted in tomorrow's press and that will show that, in the past four years, youth unemployment has risen by 24 per cent. Nearly 1.3 million young people are economically inactive and looking for work, and the Government will not provide them with work because of their economic policies. Will he also comment on the fact that eight out of 10 young people in work are earning less than £2 an hour? Is not that proof that the Government are prepared to let young people in Britain work eight weeks full time to earn what Sir Iain Vallance, the British Telecom chief, earns in one hour of one day, and that the Conservative party is the party of low pay, privilege and exploitation?

Mr. Paice: The alleged research to which the hon. Gentleman refers does not bear very much examination. The reality is that the unemployment level for the under-25s has fallen over the past two years, both as a number and as a proportion of the age group. The number of 16 to 17-year-olds defined as unemployed by the ILO has also gone down in the past two years.
As for wages, the important thing for young people is that they are developing, learning and training. What matters are the jobs for which they will be suited as adults, which is why to consider their wage levels at a very young age is to take account of only half the problem. If we had a minimum wage, there would be no jobs at all for them.

Housebuilding Industry

Mr. Nicholas Winterton: To ask the Secretary of State for Employment how many people are currently employed in the housebuilding industry. [16005]

Mr. Paice: Latest estimates show that there were 1.8 million people employed in the construction industry as a whole.

Mr. Winterton: I am grateful to my hon. Friend for that reply, but is he aware from a response that the Chancellor of the Exchequer made to me last Thursday that the housebuilding and construction sectors of our economy are in a very depressed state? Does my hon. Friend accept that there could be a dramatic multiplier effect if we could regenerate our construction and housebuilding sectors and that, if we did, we might get the feel-good factor sooner rather than later?

Mr. Paice: My hon. Friend is entirely right. There is, of course, a multiplier effect involving jobs in the construction industry but what would do the country immense damage would be any artificially inspired rise in house prices, which would lead us back into a cycle of inflation. We have seen an improvement in the housing market. Housing output last year was up by 6 per cent. on the previous year, a steady, albeit slow, improvement. That is the best way forward for the economy.

Mr. Barry Jones: Why do not the Government release council house sales receipts and employ more building workers?

Mr. Paice: For the very simple reason that it would go straight on the bottom line of public borrowing.

Unemployment

Mr. Waterson: To ask the Secretary of State for Employment what comparisons he has made between the United Kingdom's record on reducing unemployment and that of other major EU countries. [16006]

The Minister of State, Department of Employment (Miss Ann Widdecombe): Since December 1992, unemployment on the International Labour Organisation definition has fallen by nearly two percentage points in the United Kingdom while in France, Germany and Italy it has risen by one percentage point or more. It has also risen in most other European Union countries as, for example, in Spain where it has risen by 2.7 per cent.

Mr. Waterson: I thank my hon. Friend for that reply. Does she agree that those excellent comparative results are due to the much more flexible labour market that the Government have created in this country without the harmful influence of a national minimum wage or the social chapter?

Miss Widdecombe: My hon. Friend is absolutely right. There is a very clear correlation between countries with heavily regulated labour markets and countries with high unemployment. In Britain, flexible labour market policies have meant that we have attracted inward investment, that employers have been able to make the most of the recovery and that people are able to choose and agree with their employers working patterns that suit them. It is a


very good country in which to be working, and I hope that the Opposition never get the opportunity to destroy that very sound base.

Ms Short: Will the Minister please explain how it benefits the British people or the British economy to encourage competition with Europe by promoting low pay in Britain? Does she agree that there is no future for Britain as the sweat shop of Europe?

Miss Widdecombe: Indeed. I agree that there is no future for us as the sweatshop of Europe because we are not. The Opposition will not like to hear these facts but the take-home pay of a single man in the bottom 10 per cent. of earnings has risen 23 per cent. above inflation since 1979. What did the Opposition do for such people? Their pay fell under the previous Labour Government. Since 1979, real pay at all levels has risen for male full-timers and women, in comparison with the late 1970s when productivity and pay stagnated. Real take-home pay for a couple with an average earner has risen by 46 per cent.—[Interruption.] The Opposition do not want to hear the facts. They want to make statements that they cannot substantiate. When they hear the facts, they do not like it. One can tell how well the country is doing by the length of the Opposition's faces.

Mr. Heald: Can my hon. Friend confirm that Britain has the fastest-falling rate of unemployment in Europe and that that is because we have a vibrant economy with fast-rising exports and flexible labour markets, and we are the best place in Europe to do business, which is why we are getting so much inward investment at the moment?

Miss Widdecombe: My hon. Friend is right. It is significant that the rest of Europe is beginning to realise that fact, with an increased concentration on competitiveness and flexibility and a rather embarrassed retreat from over-regulation. That is a tribute to the example that we have set. It is a great pity, indeed, that the Opposition cannot revel in Britain doing well.

Social Affairs Council

Mr. Frank Cook: To ask the Secretary of State for Employment when the next Social Affairs Council meeting is to be held; and what items are to be discussed. [16007]

Mr. Portillo: The next Social Affairs Council will be held on 29 June. No agenda has yet been published.

Mr. Cook: The House will have read in the past fortnight of the expressed determination of the German Government to stop the Gastarbeiter from being engaged in conditions or at rates of pay which would undermine the conditions of the indigenous worker. The Secretary of State may be pleased to know that that is indeed welcome news to those constituents of mine who undertake the "Auf Wiedersehen Pet" route and go to work in Germany. Will the Secretary of State tell the House why my constituents may expect the German Minister to defend their standards when he will not?

Mr. Portillo: If the German Minister's policy of the posted workers directive were carried through, it would prevent the hon. Gentleman's constituents from going anywhere in Europe to find work at the rates of pay that employers would like to offer. I believe in a single European market. I believe in people being able to offer

their labour freely in any place in that European market. I think that perhaps the hon. Gentleman does not believe that. If he does not, it would be to the disadvantage of his constituents who at present have the freedom to go to Germany and also of his constituents who will be employed when Samsung brings 3,000 jobs to his constituency.

Mr. John Marshall: Would my right hon. Friend like to suggest to the German presidency that the subject of job creation should be on the agenda, so that he may point out that many more jobs are being created in this country than in other European countries?

Mr. Portillo: My hon. Friend is extremely well experienced in these matters and he will not be surprised to hear that when European Employment Ministers meet, although supposedly unemployment is meant to be top of their agenda, they spend much of their time discussing directives which would make it more difficult for people to get jobs in Europe and more difficult to move from country to country. The question of unemployment is usually relegated to a brief discussion towards the end of the agenda.

Mr. Barron: The Ministers at the Social Affairs Council agree with a national minimum wage. Does the Secretary of State accept that 1 million people who are being paid under £2.50 an hour in the British economy may think that it is a good idea to have a national minimum wage in this country? Why do the Government take every opportunity, including abolishing wages councils, to drive down the hourly rate to level people down? Surely British workers deserve better than this Government who believe in low pay?

Mr. Portillo: The hon. Gentleman and his party do not believe in anything, or if they do, they are not prepared to tell the public what it is. If the hon. Gentleman is so keen on having a minimum wage, I offer him the opportunity to stand up again and tell us what that minimum wage should be. Why will he not do that? I believe in a high-wage economy based on high levels of education and high levels of skill. The hon. Gentleman believes in promising people something which he is not prepared to deliver. He believes in trying to mislead people. I believe in trying to raise people's standards by education and skills. The people of this country, when it comes to the election, will not put up with the deception which is being attempted by the hon. Gentlemen.

Trade Unions

Mr. Fabricant: To ask the Secretary of State for Employment what assessment his Department has made regarding the operation of democracy in (a) the British trade unions and (b) those of other Organisation for Economic Co-operation and Development countries; and if he will make a statement. [16008]

The Parliamentary Under-Secretary of State for Employment (Mr. Phillip Oppenheim): Our reforms have ensured that trade unions in this country are now more accountable to their members than ever before. The strike rate in the United Kingdom has fallen twice as fast as that in the OECD generally. The last time that there were as few strikes was so long ago that the Liberals were in power.

Mr. Fabricant: Is it not true that when, in the 1980s, the Government introduced legislation to democratise the


trade unions, with secret ballots for electing their leaders and before strike action, the Labour party bitterly opposed it all? Does my hon. Friend agree that under the tranquil waters of trade union democracy there lurks a kraken waiting to be awoken by the Labour party and its trade union paymasters?

Mr. Oppenheim: Characteristically, my hon. Friend is right. Our trade union reforms have given trade unionists the right to secret ballots before strikes, the right to refuse to strike and the freedom to leave a trade union without losing their jobs. Every one of those policies was opposed by the Labour party. On the basis of that record, the kraken should be put out of its misery by being put permanently to sleep.

Mr. MacShane: The question referred to trade unions in other countries, and the Minister will be aware that one of the most distinguished European trade unionists is the Secretary of State's opposite number in Germany, the Minister of Labour, Norbert Blüm, who has been in post for about 10 years—unlike the Secretary of State, who is here today, gone Portillo in a few months. Will the Minister reply to the question and assure me that, if we want a high-wage, low-unemployment economy such as that of Germany, which the Secretary of State praised yesterday, the best thing that he could do is to arrange a job swap with the Minister of Labour in Germany so that we could all say auf Wiedersehen, Portillo?

Mr. Oppenheim: I am not sure which monster sounds worse, the kraken or the Blüm, but I can tell the hon. Gentleman that the proof of the pudding is in the eating. Strikes in this country are now running at exactly 1 per cent. of the level that we inherited from Labour in 1979.

Jobseeker's Allowance

Mr. Nigel Evans: To ask the Secretary of State for Employment how the jobseeker's allowance will help people to get back to work. [16009]

Miss Widdecombe: The back-to-work bonus, national insurance contributions holiday, revision to partners working hours and other jobseeker's allowance measures, combined with the initiatives announced in the Budget, will provide substantial help and incentives for unemployed people.

Mr. Evans: I am extremely grateful for that reply. I welcome the splendid news about the falls in the rate of unemployment over the past 14 to 15 months. However, does my hon. Friend agree that for each person who finds himself or herself long-term unemployed, that is a personal tragedy, and that the new package of measures associated with the jobseeker's allowance, such as the back-to-work bonus and the extension of employment on trial are welcome news? Does she agree that they are constructive measures that will increase employment opportunities, as opposed to the job destruction measures advocated by the Opposition, such as the national minimum wage, at whatever rate, and the social chapter?

Miss Widdecombe: My hon. Friend is right, and I have hopes, although I suspect that they are not destined to be fulfilled, that the whole House may welcome the substantial fall in long-term unemployment now occurring. That is due to our labour market policies, and I am glad to say that work start and work trial, the national

insurance contributions holiday and the other measures that I have outlined will substantially benefit the long-term unemployed. Again, I am rather sorry to see that there is no joy among the Opposition at the fall in long-term unemployment, but only rather sad looks. They do not want people to feel good, because that means that they feel bad.

Mr. Battle: Is not the jobseeker's allowance an attempt to drive people back to work by taking their income away if an officer of the employment agency feels that they do not look properly dressed for work or have not made sufficient telephone calls? Where is the justice in that? Are not the Government simply penalising people for being unemployed through no fault of their own?

Miss Widdecombe: No, the Government are not penalising people for being unemployed, and we are extremely keen that the unemployed should have every possible assistance to get back to work. Benefit cannot be withdrawn on the whim of an employment officer, as there is a process of independent adjudication. The hon. Gentleman should perhaps study the Bill so that he can understand it a bit better.

Mr. Sykes: Is it not ridiculous that some Opposition Members do not accept that there are some people who will not work, and that the Jobseekers Bill will make such people do a job of work in return for benefit? My hon. Friend the Member for Ribble Valley (Mr. Evans) forgot to mention the national insurance holiday in his list. As an employer, can I assure my hon. Friend the Minister that the national insurance holiday will be extremely beneficial in helping the long-term unemployed get off the unemployment list?

Miss Widdecombe: One of the problems faced by the long-term unemployed is that of employer perception. There is a general, if misguided, view among employers that if a person has been out of work for a substantial time, it is somehow his fault. One of the welcome outcomes of work start, work trial and the national insurance contributions holiday is that they provide an incentive to employers to take on the long-term unemployed. As a result, not only does the long-term unemployed person benefit immediately, but the employer's attitudes towards the long-term unemployed change. I must register once again that I have not heard the Opposition welcome that.

Minimum Wage

Mr. Foulkes: To ask the Secretary of State for Employment what plans he has to conduct research into the effects of a national minimum wage. [16010]

Mr. Oppenheim: I have looked at unemployment among young people in Spain at 38 per cent.—a country which has a national minimum wage—and concluded that no further research is necessary.

Mr. Gapes: Smart arse.

Mr. Foulkes: My hon. Friend the Member for Ilford, South (Mr. Gapes) refers to the Minister as a "smart arse", but I will say nothing on that subject as I know that you would stop me, Madam Speaker.
Would the Minister care to contrast a constituent who telephoned me at the weekend to say that he had been offered a job at £1.70 an hour as a security guard—with all the danger that that involves—with the chief executive


of PowerGen, who gets £34,000 for three "little jobs" which he does in his spare time, and a further £350,000 in salary? Does not that illustrate that we need legislation not only for a national minimum wage but for a national maximum wage?

Mr. Oppenheim: I do not know whether that was a Labour policy announcement. We all want the less well-off to be better paid, but the Opposition's policy is doubly deceitful and dishonest. The Opposition pretend to the less well-off that there is a simple and cost-free way to raise wages, but they will not even say until after the election at what level the minimum wage will be set. In effect, they are giving the less well-off a menu without prices in the hope that the less well-off will not find out the true cost—which will be their jobs-until after the election.

Mr. Thurnham: Did not Barbara Castle carry out research into a minimum wage 20 years ago and reject it because it would cause unemployment? Does not that prove that Labour never learns?

Mr. Oppenheim: Barbara Castle, when she was Secretary of State for Employment, and John Grant, when he was the low pay Minister in the last Labour Government, had the honesty and integrity to admit that no minimum wage policy could be implemented because of the problem of pushing up differentials. It is extraordinary that new Labour—as it calls itself—is, far from progressing on the issue, regressing.

Ms Eagle: Is the Minister happy that 1 million people currently earn less than £2.50 an hour and that 300,000 earn less than £1.50 an hour after nearly 17 years of this appalling Government?

Mr. Oppenheim: The hon. Lady is quoting from a recent press release from the hon. Member for Peckham (Ms Harman), which criticised several national supermarket chains for paying less than £4 an hour. The hon. Lady might like to know that her hon. Friend the Member for Peckham missed one important retailer off her list. The Co-op pays many workers about £3.50 an hour, which is well below the TUC's recommended minimum wage.

Unemployment

Mrs. Gillan: To ask the Secretary of State for Employment what comparisons he has made of the change in the rate of unemployment between the United Kingdom and other EU countries; and if he will make a statement.

Mr. Portillo: In the past two years, unemployment in the United Kingdom fell by 600,000, while unemployment registers rose in the rest of Europe by 1.9 million.

Mrs. Gillan: Is it not a fact that the United Kingdom is the only country in the European Union in which unemployment not only has fallen consistently in the past year but is below average? Does my right hon. Friend agree that our opt-out from the social chapter preserves not only investment but jobs? Perhaps he would care to comment on the fact that a shop floor superviser for Black and Decker, which recently moved its production from Germany to the United Kingdom, said:
Industry is flexible—it has to be—the social chapter isn't.

Mr. Portillo: My hon. Friend is absolutely right. The United Kingdom has had the record that she described.

Unemployment has fallen faster than in any other country and we now have higher employment levels for men and women than most countries in Europe. The general range of flexible labour market policies that the Government have pursued has been responsible for that rapid turnaround in our employment and unemployment prospects, as is recognised throughout Europe. Other countries are studying what we have done. Typically, only the dinosaurs in the Labour party refuse to recognise what has been achieved and how it has been achieved.

Mr. Grocott: Is it too much to expect a little consistency from the Secretary of State in the lectures that he is fond of giving on our economy? Given that he and the Prime Minister repeatedly lectured us during the worst part of the recession that unemployment was nothing whatsoever to do with the Government, will he take the opportunity of telling the House and the country that, if there is some small upturn in the level of employment, it has nothing whatsoever to do with the Government?

Mr. Portillo: I think that the hon. Gentleman finds it difficult to grasp fairly simple concepts. What the Government say is that they cannot create jobs. The Government are responsible for creating conditions such as low inflation, in which jobs can be created, but it is for businesses to create jobs. If we did not have low inflation, they would not be created. If we had a Labour Government, it is perfectly clear that we would have no strategy for low inflation and jobs would be destroyed for that reason, too.

Mr. Anthony Coombs: Does my right hon. Friend agree that clear evidence of the fact that the pernicious and employment-deterring effects of the social chapter are gradually dawning on European industrialists, rather than on the Labour party, is that Edward Reuter, the chairman of Mercedes-Benz, has said that, unless it does something about the costs that it is incurring but British companies are not, it will gradually move car production out of Germany to, one hopes, the United Kingdom?

Mr. Portillo: Yes, it is evident that European industrial leaders are giving thought to moving their operations to places where they do not face the burdens of the social chapter. They realise that those burdens prevent them from creating jobs. The great irony of all this is that many of the inward investment decisions have been made in north-east England and have benefited Labour consistencies, but Labour Members are so obdurate and blind that they will not even wake up to the benefits for their constituents. That is how well those people are served by Labour Members of Parliament.

Ms Harman: Will the Secretary of State admit that, since 1979, the United Kingdom has been the only G7 country that has seen no rise in the number of people employed? Does he not recognise the plain fact that, when it comes to unemployment, the British people simply do not trust this Government? They know that the Government have never been concerned about unemployment; all they have been concerned about is massaging the figures. When will the right hon. Gentleman stop fiddling the figures on unemployment? When will he stop making excuses about unemployment, and when will he produce some action to tackle unemployment?

Mr. Portillo: During the 1970s, unemployment was worse than the Organisation for Economic Co-operation and Development average. Now, it is at the OECD average, which is an improvement. What the hon. Lady will not do—possibly because she is not so good with figures—is compare a like period with a like period. Over the course of the cycle, the number of jobs in this country has increased by 1.5 million. She needs to compare like with like and not just to pick her dates at random.

Mr. Congdon: To ask the Secretary of State for Employment what is the current figure for unemployment (a) in the United Kingdom and (b) in other European Union countries; and if he will make a statement. [16012]

Miss Widdecombe: The International Labour Organisation unemployment rate in the United Kingdom was 8.9 per cent. in January 1995—lower than the EU average of 10.8 per cent. and lower than in every other EU country except Portugal, Luxembourg and Sweden. I shall, with permission, Madam Speaker, arrange for a full statistical table to be printed in the Official Report.

Mr. Congdon: Does my hon. Friend agree that Governments cannot create jobs but can create the right economic conditions in which business can flourish? Does she agree that the figures that she has just given and the 1,000 a day drop in unemployment demonstrate the success of policies designed to reduce burdens on business and create a framework in which businesses can expand?

Miss Widdecombe: My hon. Friend is absolutely right. Any comparative study with other European countries makes it clear that our policies are producing employment. At 68 per cent., we have the third highest percentage of the population in work in the European Union, and we have the second highest percentage of women in work in the European Union. We have a steadily increasing growth in jobs—260,000 in the past year alone. That is a tribute to our policies, as I said before, and Europe is beginning to realise that. Eventually, I suppose, even the Labour party will start to realise it.

Rev. Martin Smyth: I welcome the decline in the unemployment numbers, but does the Minister agree that there is a tremendous shortage of skills? Will the Government keep a watch on our European competitors who have hidden Government subsidies that affect even our shipyards? Is there not something wrong when a nation like ours cannot tender for the Oriana and when the Belfast shipyard had to employ 600 labourers from England although there is so much unemployment in Northern Ireland?

Miss Widdecombe: The hon. Gentleman is absolutely right to draw attention to skills. That is what lies behind the many Government initiatives, from the new modern apprenticeships to general national vocational qualifications and the Investors in People scheme. He is also right to say that we must all compete equally in Europe, which is why we are determined that no unfair burden of regulations puts us at a competitive disadvantage and that we will not have our workers stifled, as they would have been under the posted workers directive.

Mr. Eastham: May I remind the Minister when she is pluming herself about the unemployment figures in the

UK that, in 1979, 1.25 million people were unemployed and now 2.5 million are unemployed? May I also remind her of the important fact that 3 million male full-time jobs have been lost in the UK since 1979?

Miss Widdecombe: I am afraid that the hon. Gentleman is rather behind the times. We have a higher percentage of males in employment than France, Italy, Belgium, Greece, Ireland and Spain. Male unemployment has now been falling for some time. Male and female unemployment are falling and full-time and part-time jobs are rising. The Opposition simply cannot recognise facts even when they stare them in the face, but that is a fact. Another fact is that their policies cost jobs, the country will realise that their policies cost jobs, and they will never have an opportunity to tell us what their minimum wage will be because there will be no Labour Government to tell us.

Mr. Brazier: Although unemployment is desperately sad for the individuals concerned, would not it be astonishing if this country were to look for solutions to the problems in countries with much higher unemployment, when their policies have failed so conspicuously? That seems to be the policy advocated by the Opposition.

Miss Widdecombe: That is exactly the policy advocated by the Opposition. They are refreshingly honest sometimes. The deputy Leader of the Opposition tells us that a minimum wage will cause shake-out. Will he be explicit and tell us that what will be shaken is people, and what they will be out of is jobs?

Following is the table:


Seasonally Adjusted Unemployment Rates in EU Countries



Latest Month


Austria
N/A



Belgium
9.9
December


Denmark
9.3
December


Germany1
—



Greece2
—



Finland3
17.2
December


Spain
22.6
December


France
11.3
December


Ireland
17.6
December


Italy
12.2
December


Luxembourg
3.5
December


Netherlands
10.0
November


Portugal
6.2
December


Sweden3
8.2
January


United Kingdom
8.9
January


EU(12) Average
10.8
December


1 No ILO rate available for unified Germany.


2 Only 1991 annual average figures available for Greece.


3 Only OECD unemployment rates are available for Finland and Sweden.


N/A Not available.

Source: Statistical Office of the European Community Unemployment Bulletin, (except Finland and Sweden—OECD). Latest available data—subject to revision.

Eurostat—the Statistical Office of the European Community, or SOEC—is currently negotiating with the OECD for both organisations to compile unemployment statistics on a common basis. Because of this, Eurostat has not issued any new figures this


month. The figures quoted are those released last month, except in the case of the United Kingdom figures which are based on a methodology which is common to both organisations.

Next month, Eurostat is expected to re-establish its normal publication schedule and issue figures for all EU members based on this common methodology.

Note in particular, that the United Kingdom "Youth" unemployment rate has been revised upwards as a result of this review of methodology.

Redundancies, Dundee

Mr. McAllion: To ask the Secretary of State for Employment how many people have been made redundant in the Dundee travel-to-work area in the most recent year for which figures are available. [16023]

Mr. Paice: Information on redundancies is not available for the Dundee travel-to-work area.

Mr. McAllion: Will the Minister explain why, as happened to me, local Members of Parliament are denied information on local redundancies that have been notified to his Department, on the ground that those redundances are confidential as between the companies concerned and the Department?
Surely, if it is right for the Government to require companies to notify redundancies to the Department of Employment, it is also right for that Department to provide information about those redundancies on request to Members of the House and, through them, to the local communities that are affected by those redundancies. Or is it simply the case that the Government are now so steeped in undemocratic practices that they believe that only Tory Ministers have the right to know the real number of redundancies in the British economy?

Mr. Paice: I am sorry that the hon. Gentleman does not appear to have the type of close relationship with businesses in his constituency that would lead them to tell him automatically. There is no reason why they cannot tell him if they feel inclined to do so. That is a matter for the businesses themselves to do.
I am surprised that the hon. Gentleman did not take the opportunity to welcome the fact that unemployment in his constituency has decreased to half what it was 10 years ago. Redundancies are an inevitable part of the dynamism of an economy, as is the creation of new jobs.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Robert Hughes: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16033]

The Lord President of the Council and Leader of the House of Commons (Mr. Tony Newton): I have been asked to reply. [HoN. MEMBERS: "Oh."] I am grateful to OppositionMembers.
My right hon. Friend the Prime Minister is currently on an official visit to the United States.

Mr. Hughes: Is the Leader of the House aware of the sad plight of about 3,000 haemophiliacs who have contracted hepatitis C from contaminated blood used in their ordinary treatment? Do the Government accept the overwhelming moral responsibility that exists and the case

for a hardship and compensation fund? When the Prime Minister returns from America, will the Leader of the House ask him to have a word with the Secretary of State for Health and tell her to stop resisting that claim and allow justice to be done?

Mr. Newton: The straightforward answer to the first part of the hon. Gentleman's question is that of course I am aware of that tragic position. Indeed, I had some experience of a related one when I was Minister for Health and there was the problem of haemophiliacs with AIDS. I will, of course, do as the hon. Gentleman requests and bring his question to the attention of not only my right hon. Friend the Prime Minister but my right hon. Friend the Secretary of State for Health.

Mr. Knapman: I congratulate my right hon. Friend on Scotland's continuing success in attracting inward investment. Might that in any way be prejudiced by Opposition parties' policies with regard to devolution?

Mr. Newton: It is certainly the case that all the signs are that Scotland has just enjoyed another record year for inward investment. I understand that it is attracting inward investment projects at the rate of about 100 a year, examples being Motorola at East Kilbride and NEC at Livingston. One thing is certain: that inward investment is coming as a result of Conservative policies and would be put off by Labour policies.

Mr. Prescott: Can the right hon. Gentleman tell me why, if the economy is now so strong that the Prime Minister can offer tax cuts in November 1995 and November 1996, taxes are going up again on Thursday?

Mr. Newton: The right hon. Gentleman well knows that taxes have had to be increased as part of a number of difficult decisions to bring about recovery from recession and the sustained economic growth that is now going on. As my right hon. Friend said once again at the weekend, as those policies pay off we shall seek to reduce taxes as soon as it is prudent to do so. The one thing that everyone in the country knows is that a Labour Government never have, and never will, reduce taxation.

Mr. Prescott: Is it not the case that the Government are taking £800 a year in new taxes now, so that at the next general election the Tories can bribe us with our own money? Does the right hon. Gentleman not understand that the British people now know that, when it comes to tax, you can never trust a Tory?

Mr. Newton: I hope that the right hon. Gentleman will reflect on two facts. The first is that, on average, households are expected to be about £250 better off this year than last, even after tax and inflation, and the second, on which I hope he will reflect, is that, if we had maintained the tax regime that we inherited from the last Labour Government, more than 1 million more people would be paying tax next year.

Sir Patrick Cormack: Does my right hon. Friend agree that middle England is not a land that takes kindly to political correctness or positive discrimination? Will he give a firm assurance that under the Conservatives it will never have to submit to either?

Mr. Newton: I think that I can safely give my hon. Friend that assurance in general terms, but I would want to look carefully at each specific proposition.

Mr. Pearson: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16034]

Mr. Newton: I have been asked to reply.
I refer the hon. Member to the answer I gave some moments ago.

Mr. Pearson: Now that the Prime Minister has promised tax cuts in November, will the Leader of the House say whether that is a real promise or the sort of promise that the Chancellor makes on a wet night in Dudley?

Mr. Newton: It is a point that is reflected in the fact that one in five taxpayers now pays tax at the lower rate of 20p in the pound compared with the basic rate which stood at 33 per cent. when the Labour party was in office. That point is also reflected in the fact that last year's increased allowances for pensioners took 190,000 people out of taxation—many of them, no doubt, in Dudley.

Mr. Harry Greenway: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16035]

Mr. Newton: I have been asked to reply.
I refer my hon. Friend to the answer I gave some moments ago.

Mr. Greenway: Is my right hon. Friend aware that there are 56,000 asylum applications awaiting decision? Are not bogus asylum applications damaging to the prospects of honest and true immigrants as well as damaging to race relations? Will my right hon. Friend do something about it? [Interruption.]

Madam Speaker: Order. The House must settle down.

Mr. Newton: My right hon. and learned Friend the Home Secretary has already announced measures to speed up the processing of asylum applications to deal with the backlog. As a result, 7,000 more cases will be processed every year. My hon. Friend will be aware of, and no doubt welcome, the fact that my right hon. Friend the Prime Minister made it clear last weekend that there will be a new Bill in the autumn to tighten up the asylum rules further. I believe that that will be widely welcomed, as it is, as my hon. Friend said, in the interests of good race relations.

Front-line Services, Sheffield

Mr. Bill Michie: To ask the Prime Minister if he will visit Sheffield to discuss funding of front-line services. [16036]

Mr. Newton: I have been asked to reply.
My right hon. Friend has no plans to do so.

Mr. Michie: Two years ago, the Prime Minister did have plans, but never arrived. When the Leader of the House answers this supplementary question, will he debate not the past but the present and future in terms of funding in Sheffield? The funding in terms of Government grant is becoming so bad that it is affecting front-line services to such a degree that the Labour party, the Conservative party and the Liberal Democrat party in Sheffield support a redetermination bid. Will the Leader of the House ask the Prime Minister to support that bid and to come to talk to the people of Sheffield—the carers, teachers and children—who are suffering under the present regime?

Mr. Newton: I can understand why the hon. Gentleman, like many other Opposition Members, does not want to debate the past, and I will not do so—I shall come to the present. The latest figures for March 1994 show that there are, in Sheffield, nearly £8 million in council tax arrears, more than 1,200 vacant properties and unspent school balances of £5 million. Perhaps the Opposition should address those problems first.

Engagements

Mr. Barron: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16037]

Mr. Newton: I have been asked to reply.
I refer the hon. Gentleman to the answer I gave some moments ago.

Mr. Barron: Has the Leader of the House seen the latest report of the National Federation of Housing Associations, which reveals that because of Government cuts this year, only 17,000 new homes will be built? Given that repossessions in Britain are still running at 1,000 per week, does he agree with me that the Prime Minister's offer on Saturday of a White Paper on housing is totally inadequate for the needs of the country?

Mr. Newton: I might pay more attention to the hon. Gentleman if his comments were a little more balanced—for example, if he had acknowledged that last year housing starts were up 13 per cent. and repossessions have fallen by more than a third since the peak in 1991. He might have added that the average mortgage is now down by £140 a month since 1990.

Mr. Heald: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16039]

Mr. Newton: I have been asked to reply.
I refer my hon. Friend to the answer I gave some moments ago.

Mr. Heald: Has my right hon. Friend had an opportunity to see the Audit Commission report on the performance of local authorities, showing that Conservative authorities provide better services at lower costs, that eight out of the top 10 most debt-ridden councils are Labour and that, typically, a Conservative council has a council tax 40 per cent. lower than a Labour council? Does that not show that Britain is better off under the Tories?

Mr. Newton: I sense some support for my hon. Friend and I certainly wish to extend my support to him. The report ties in the indicators in the Audit Commission report with the fact that for the average band C council tax payer, Conservative councils cost people nearly 40 per cent. less than Labour councils and 25 per cent. less than Liberal Democrat councils. The fact is that Conservative councils do cost less and provide better services.

Mr. Davidson: Does the Minister expect a vote of confidence in the Government in the Scottish local authority elections on Thursday?

Mr. Newton: I envisage that in the Scottish local elections on Thursday people will focus on the fact that


in Scotland, as in the rest of the United Kingdom, Conservative councils cost them less and give them better value for money.

Mrs. Gorman: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16040]

Mr. Newton: I have been asked to reply.
I refer my hon. Friend to the answer I gave some moments ago.

Mrs. Gorman: Will my right hon. Friend consider joining me in congratulating the Federation of Small Businesses, which voted at its annual conference to come out of the European Community? Does he agree that most good economic ideas have their origins in small businesses?

Mr. Newton: I fall short of expressing congratulation in quite the terms that my hon. Friend seeks, but I certainly did note the resolution of the Federation of Small Businesses in Torquay, not least because I happened to be in the west country that weekend and was asked one or two questions about it. We all understand the federation's concerns, not least about what is sometimes seen as excessive interference and over-regulation. We need to continue to address those real concerns, both by our attitude to subsidiarity in Europe and by our policies on deregulation at home.

Mr. Winnick: In view of the Government's deep and continuing unpopularity, can the Leader of the House tell us how far the Prime Minister is safe from internal party intrigues to change the party leadership? Does he accept that the words of loyalty he will no doubt say were used by Cabinet Ministers in 1990? Look what happened to her—she was betrayed by her Cabinet colleagues and repeatedly stabbed in the back.

Mr. Newton: I recall something else about 1990, which is that the hon. Gentleman was talking about the deep unpopularity of the Government two years before we won the last election.

Mr. Spring: To ask the Prime Minister if he will list his official engagements for Tuesday 4 April. [16041]

Mr. Newton: I have been asked to reply.
I refer my hon. Friend to the answer I gave some moments ago.

Mr. Spring: Is my right hon. Friend aware of the continuing waste, bureaucracy and extravagance that mark so many Liberal and Labour local authorities? Is he aware that Suffolk county council, while protesting frugality, is spending some 30 per cent. more on its education bureaucracy than the surrounding counties—money that could be spent directly on schools and pupils?

Mr. Newton: I was not aware of the specific figures from my neighbouring county of Suffolk. What my hon. Friend said will certainly strike a chord with many Conservative Members. The figures reflect the extremely large number of non-teaching staff compared with teaching staff, to which my right hon. Friend the Prime Minister has referred on a number of occasions.

Mr. Simpson: Will the Leader of the House explain the compelling case for a cut in taxation at a time when the Government will not fully fund the pay awards that they make, or the services that they demand, in health and education?

Mr. Newton: The compelling case is to strike an appropriate balance between those considerations and the considerations of enlarging choice and improving our economic prospects. The Government have constantly sought to do that and it is reflected in the improvement of our public services, in the strengthening of our economy and in paving the way to cut taxes when it is prudent to do so.

Mr. Gill: My right hon. Friend the Leader of the House clearly understands that the butchers, the bakers and the candlestick makers are fed up with regulatory overkill. Will he take this opportunity to confirm to the House that he understands that, when Government make a law, that law impacts most heavily on those who get up in the morning and make something or do something—in other words, those people who create the wealth in our nation and upon whom the rest of society depends?

Mr. Newton: I very much agree with my hon. Friend. I repeat the answer that I gave to my hon. Friend the Member for Billericay (Mrs. Gorman). There is no doubt that our emphasis on reducing unnecessary interference from Brussels through the subsidiarity theme and not least our emphasis on deregulatory measures at home—which we shall continue to drive forward—are of great importance to the business prosperity of this country.

Points of Order

Mr. Phil Gallie: On a point of order, Madam Speaker. I draw attention to a problem that arises constantly between me and the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), to whom I have given notice of my point of order. The hon. Gentleman constantly invents phrases and attributes them to me. On this occasion, I point to the Hansard of the Scottish Grand Committee of—

Madam Speaker: Order. Political knockabouts that take place in the Scottish Grand Committee are not points of order; to raise them as such is an abuse of the House. The hon. Member for Ayr (Mr. Gallie) should raise them at the time and not now.

Mr. Bob Dunn: On a point of order, Madam Speaker, concerning remarks made by the hon. Member for Sheffield, Brightside (Mr. Blunkett) during the education debate last Wednesday. I have given notice of my intention to raise a point of order to the hon. Member for Brightside, and to the shadow apprentice, the hon. Member for Liverpool, Walton (Mr. Kilfoyle).
In column 1037 of Hansard, the hon. Member for Brightside claimed during the education debate last week that Kent county council had spent £9 million on a nursery voucher experiment. I have checked that, and it is not true.

Madam Speaker: Order. That is not a point of order for the Chair; it is a political argument. The hon. Member for Dartford (Mr. Dunn) might have done me the courtesy of letting me know in advance. If he will come to his point of order to me, I will try to deal with it. He might have made some indication to me, so that I might also see Hansard.

Mr. Dunn: Madam Speaker, I am very sorry that you were not told about the point of order—it is my fault entirely. I am making a charge against the hon. Member for Brightside that he misled the House with a statement which was untrue. While I was debating the matter today on Radio Kent, I received a message that the hon. Member for Brightside had acknowledged that the statement was untrue.

Madam Speaker: What is the point of order for me, please?

Mr. Dunn: I am about to get to it, Madam Speaker. I am taking my time, to make sure that you have the full facts before you.

Madam Speaker: Order. If I had the full facts, I would be able to respond to the hon. Member. He might have done me the courtesy of giving me the full facts to start with.

Mr. Dunn: Madam Speaker, as you know, I have already apologised for not giving you the full facts.
The hon. Member for Brightside has acknowledged that the statement that he made was misleading and untrue. I think it is essential that he should come to the Chamber and apologise to you and to the House for misleading us last Wednesday.

Madam Speaker: I will look at Hansard. Far too often, hon. Members raise points of order that are not points of

order but are questions of political cut and thrust and debate across the Floor of the House. Hon. Members on both sides of the House have the opportunity to correct these issues by means of the Order Paper and in debate.

Mr. Peter Brooke: I entirely understand the grounds on which you refused my private notice question, Madam Speaker, but I hope that you will allow me the licence to remark that, the next time a Secretary of State closes a hospital that is nearly 900 years old, he or she will have the moral courage to come to the Dispatch Box.

Sir John Gorst: Further to that point of order, Madam Speaker. The next time that a Secretary of State wishes to close another hospital in my constituency, I hope that a similar courtesy will be offered, so that I may be given an opportunity to vote against it.

Several hon. Members: rose—

Madam Speaker: Order. I must deal with those two points of order.
The right hon. Member for City of London and Westminster, South (Mr. Brooke) was a Secretary of State for many years, and therefore is probably not aware that we do not mention applications that are made to me about such matters. However, I understand his strength of feeling.
May I say to the right hon. Gentleman and to the hon. Member for Hendon, North (Sir J. Gorst) that there is an Adjournment motion tomorrow morning, when hon. Members will have three hours during which they may raise such issues? If hon. Members are in their place at that time, I might look their way. Who knows?

Mr. Ian McCartney: I seek your advice on access to information to deal with constituency issues. For some months now, hon. Members on both sides of the House have been inquiring about the blood transfusion service, in particular the closure programme at Lancaster.
My hon. Friend the Member for Wallasey (Ms Eagle) and I have found out that our telephone calls about these matters are being monitored by the management of the blood transfusion service, and, as part of that procedure is to prevent us from discussing matters with the staff at the centre, I find it an abuse of hon. Members' access to deal with constituency matters. I ask you what we need to do to ensure that that monitoring is stopped immediately.

Madam Speaker: There may well be a question of privilege involved in that. Will the hon. Gentleman please write to me without delay?

Mr. Jacques Arnold: What protection do hon. Members have from the provision of bogus statistics and information such as that provided by the Lib-Lab Kent county council to the hon. Member for Sheffield, Brightside (Mr. Blunkett)?

Madam Speaker: I hope that they will exercise their minds about these matters and determine for themselves what are the true statistics.

Mr. Peter Butler: I wish to raise a point of order of which I have given notice, both to yourself, Madam Speaker—although briefly and without a copy of Hansard, for which I apologise—and


to the hon. Member for Sheffield, Brightside (Mr. Blunkett). It arises from the debate last Wednesday on education. I was present at the opening of the debate and, indeed, for the hon. Gentleman's speech, but I had left by the time the incident that I am about to raise had taken place, because I had gone to the Home Affairs Select Committee.
After I had left, the hon. Member for Brightside, in an intervention, purported to describe a letter that I had written to a constituent, saying that it attacked Tory-controlled Buckinghamshire. That was a misrepresentation of the contents of the letter, but I appreciate that you will not take that point. My point is that, yet again, the hon. Gentleman did not do me the courtesy of informing me that he was going to raise the matter. He had the letter with him—translated, I believe, into braille, for obvious reasons. He was clearly prepared to use it, and intended so to do.
Madam Speaker, you repeatedly rule that hon. Members should observe common courtesy among themselves; you are repeatedly ignored. Is there anything that you can do about it?

Madam Speaker: I have no authority to enforce it. I simply ask hon. Members to abide by common courtesies. Far too many hon. Members do not do so.

Mr. Simon Hughes: Following that, and having heard your answers to colleagues earlier, Madam Speaker, I raise a more general point of order about statements and answers. I know that you cannot determine what Ministers do, but surely there must be some control of Ministers who make statements about a minor variation in policy, and yet do not make any statements about the conclusion of an assessment of policy—the health service reforms in London. The assessment of that policy was introduced by a statement, but the decisions were announced by way of a written answer, not a statement.
I have no chance, as the Member of Parliament representing Guy's hospital—and nor have the right hon. Member for City of London and Westminster, South (Mr.

Brooke), representing Bart's, and the hon. Member for Hendon, North (Sir J. Gorst)—to ask any questions; and the whole process began with a statement in the House.
I am merely asking you, Madam Speaker, to find out whether rules exist to determine what matters are so important that they must be brought to the House. Otherwise, war could be declared by means of a written answer and peace by means of a statement, and we would have no chance to ask about the former—only a chance to say, "Thank you very much," when we are told the latter.

Madam Speaker: I well understand hon. Members' frustration, but there are no rules that I can consult. Perhaps the hon. Gentleman, and others, will put the matter to the Procedure Committee. I entirely accept that there are occasions when it is very important for a Minister to come to the Dispatch Box so that hon. Members can question him. I ask hon. Members to bear in mind the fact that there is an Adjournment debate tomorrow morning, but I make no promises. Let us leave it at that for the moment.

Mr. Michael Stephen: On a point of order, Madam Speaker. My right hon. Friend the Secretary of State for Health has spent £41.5 million on building an almost completely new hospital to serve my constituents. I am extremely disappointed that she is not here today, so that I can congratulate her personally.

Madam Speaker: That is a total abuse of the House. I should have thought that hon. Members—however new they were in 1992—would be accustomed to our procedures now, and would not continue to abuse the House and its procedures.

Several hon. Members: rose—

Madam Speaker: No, I am going to move on now. I have taken enough points of order.

Mr. Gallie: rose—

Madam Speaker: I have already taken a point of order from the hon. Gentleman. He must resume his seat.

Boxing

Mr. Jim Callaghan: I beg to move,
That leave be given to bring in a Bill to ban the sport of boxing.
As a young sports teacher many years ago, I always had doubts about the merits of boxing, having seen the state of a former Manchester world champion; but it was when I saw the plight of Muhammud Ali that I became totally convinced of the terrible tragedies and hazards connected with professional boxing. He was and is known as "the greatest", but in my view he is the greatest advertisement for the necessity of an independent Government inquiry to investigate the safety of boxing.
It is said that Ali has Parkinson's disease, and that his condition is not due to boxing, but my videos of his latest fight suggest otherwise. I have with me an Evening Standard report that claims that he received 29,000 blows to the head. I do not know whether that is an exaggeration, but I do know that he took one blow too many.
Given the medical condition of another professional boxer, Michael Watson, following a contest between him and Chris Eubank, I asked the Minister responsible for sport for his views and intentions regarding the dangers of professional boxing. On 23 June 1993, I asked the Secretary of State for National Heritage whether he had received a copy of the British Medical Association's book, "The Boxing Debate", which reported in detail the medical risks associated with boxing, and whether he intended to set up an independent inquiry. I also asked the Prime Minister, during Prime Minister's questions, if he would ban boxing. The answer has always been the same.
On 10 May 1994, I succeeded in obtaining an Adjournment Debate on brain injuries in boxing. I based my speech on the BMA's book. The BMA wants boxing to be banned, and in 1982 it declared:
in view of the proven ocular and brain damage resulting from professional boxing the BMA should campaign for its abolition.
In 1987, the BMA stated:
In view of the continuing serious ill effects on the health of boxers the BMA should pursue the Government with renewed vigour until there is a ban on boxing.
In 1992, it again called for a ban on boxing, and in 1993, it produced its book "The Boxing Debate", which states that the heaviest blows may represent as much as half a tonne—which is like being hit by a 12 lb padded wooden mallet travelling at 20 mph. That is enough force and velocity to injure any brain.
The report says that there are two main ways in which boxing may lead to structural damage to the brain. The first type of damage occurs as an acute episode, in which one or more severe blows during a single fight lead to a loss of consciousness and, occasionally, to death. Death in the ring, or in the days or weeks following the contest is usually attributed to acute haemorrhage of the brain.
The second kind of damage tends to develop over a much longer period and is cumulative. It is associated with chronic neurological disorders that are often experienced by boxers. Damage to the eye and brain occurs in both amateur and professional boxers, although it is doubtful whether participants or others involved in boxing fully appreciate the risks, especially the dangers of delayed, cumulative brain damage.
Damage can be detected only after it has occurred, and by then it may be too late. It has been too late for 361 boxers whose deaths have been recorded worldwide since 1945. In the United Kingdom, it has been too late for the following boxers. In 1969, Ulrich Regis died after fighting Joe Bugner. In 1979, Angelo Jacopucci died after fighting Alan Minter. In 1980, Johnny Owen, aged 24, died after fighting Lupe Pintor. In 1982, Young Ali died after fighting Barry McGuigan. In 1986, Steve Watt died after fighting Rocky Kelly. In 1987, Joe Sticklen died in his first fight. In 1988, Brian Baronet died fighting Kenny Vice. In 1989, Rod Douglas had to have brain surgery; he will never fight again.
In 1989, Roy Hodgson died. In 1991, Michael Watson fought Eubank. We know that Michael Watson is in a wheelchair, having had brain surgery. In 1994, Bradley Stone, aged 23, died. In 1994, Michael Bentt went into hospital after fighting Herbie Hide. He will not fight again. In 1995, we had the most recent case, involving the McClellan v. Nigel Benn contest. Three amateurs, one in Liverpool, one in London and one in Margate, have all had brain surgery.
From those statistics alone, it can be said that prevention is better than cure, particularly when the disease in question is incurable. The virility, or any other virtue, shown by one man hitting another on the head in a boxing ring cannot transform the act into an accident. The blows are intended. Hitting one another is deliberate. That point, no matter how trite, distinguishes boxing from all other sports. The prime intention is to knock out one's opponent before he has a chance to inflict a knock-out blow on the other boxer.
Before his recent fight, Gerald McClellan said:
You have to go to war and in war you have to be prepared to die.
That is what boxing is. We all know that Gerald got his war, and that, tragically, he paid the price in his savage bout with Nigel Benn. I am sure that I speak for all hon. Members in the House today in saying that we all wish him well now that he has survived a life-threatening injury and been flown back to the United States of America to be with his family. I doubt whether he will fight again.
I am sure that the House will also want to send its full appreciation to Mr. John Sutcliffe, the neurosurgeon who operated so successfully on Gerald McClellan. He has saved his life. Although it may surprise hon. Members, I also give credit to the British Boxing Board of Control, which has made important safety improvements in boxing since learning the lessons from the Watson-Eubank fight. Perhaps it read the suggestions I made in my Adjournment debate on 10 May 1994. It had four doctors, paramedics and ambulances at the McClellan-Benn fight. The speed with which oxygen was administered to the stricken boxer saved his life.
Despite all those necessary reforms, further calamities will occur. I was deeply concerned when, after the Gerald McClellan fight, I read in the press that many 11-year-old children were getting ready for their first bouts. The "kid gloves" scheme at Croxteth community school has put boxing back in schools. The Minister with responsibility for sport has confirmed that the school is receiving financial support from the Sports Council and Sportsmatch.
From a recent parliamentary question tabled by my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Galbraith), a neurosurgeon, we learned that Sportsmatch


contributed £5,000 to the scheme. It is ludicrous for the Minister to argue that the scheme involves a "non-contact" form of boxing, and that its purpose is to teach children the skills and discipline of boxing without hitting an opponent. How ridiculous.
Over a number of years, I have asked various Ministers to initiate an independent inquiry into the health risks associated with boxing, all of which have been highlighted by the BMA in its various reports on boxing.
I have been told that the Government did not believe that the risks associated with boxing were sufficient to justify such an inquiry. I deeply regret the Government's negative attitude towards such requests, because I firmly believe that a public inquiry could prevent serious injuries, and even death, for some boxers.
I still believe that an independent inquiry is necessary because we have reached an impasse, with the British Medical Association on one side of the argument about safety in boxing and the British Boxing Board of Control on the other, with the Minister responsible for sport in the middle, not doing anything. Because of that impasse, I believe that there is no alternative but to ban boxing before further calamities occur in the boxing ring.
As one famous boxer recently said:
Boxing damages your brain. Don't let anyone tell you different.
Accordingly, I urge the House to take action to save the health and lives of boxers by calling for a ban on boxing.

Mr. Harry Greenway: I beg to oppose the Bill, but, in doing so, I acknowledge that no hon. Member doubts the sincerity of the hon. Member for Heywood and Middleton (Mr. Callaghan) or his consistency of view in this important matter.
The hon. Gentleman mentioned a catalogue of deaths in boxing, and I am quite prepared, in defending boxing, to stand up and say that 14 boxers have been killed since 1946. However, I ask the House to set against that statistic the fact that, this winter alone, many more people than that have died on the Cairngorms while mountaineering. No hon. Member has come to the House to say that mountaineering should therefore be made illegal.
There is an extremely serious inconsistency in the hon. Gentleman's argument. I remind him and the House that people can choose whether to box, just as they can choose whether to go mountaineering, with all the known attendant dangers.
The tragic case of Michael Watson and the others mentioned by the hon. Gentleman moved the House as they moved this country. Such suffering moves the world, as does the suffering of people in any sport who are damaged almost to the point of death. I would remind the House that Mr. Sutcliffe, the surgeon who operated on McClellan and was mentioned by the hon. Gentleman, does not want boxing banned, and nor do many other doctors, who know that it would only go underground if it were.
We really must not take the nanny state to the extremes suggested by the hon. Gentleman. Boxing is a very dangerous sport, as is my own main sport of horse riding. I mentioned mountaineering, but there are also many other dangerous sports, such as skiing, rugby football, motor car racing and cycle racing.

Sir Patrick Cormack: Jogging.

Mr. Greenway: People have died jogging, but this is a serious matter, and I want to consider the lethal sports. People are killed in motor racing, but nobody suggests that that should be stopped.
Boxing would not in any event be stopped if the Bill were passed. It would go underground. People would fight with bare fists, unlicensed and without medical supervision. What a dreadful society we would create if that were allowed to happen. What would happen to people drawn in against their will, as they would be if boxing were not open and they were unable to refuse? Is that what the hon. Gentleman wants? I am sure that it is not.
Boxing teaches people the art of self-defence. To listen to the hon. Gentleman, one would think that there were no arts that a boxer could employ to defend himself and avoid damaging blows, but the great art of boxing is not to be knocked out or knocked about, and 99 per cent. of boxers achieve that aim.
Boys enjoy boxing. I have helped in boxing clubs in my constituency and in east London, where boys have learned the art of boxing and become involved in an activity which has given them life when nothing else could. Does the hon. Gentleman want to take that away from such boys? Many come off the streets, they learn the art of boxing, and they learn self-discipline, often for the first time. Why should that be taken from them? They enjoy it, their families enjoy it, and the community enjoys it.
With all deference to the hon. Gentleman, is he not aware of clubs all over London where boxing takes place? Does he not know that boxing is returning to schools, and that, in such clubs, schools and other areas, there is very close supervision of the sport? That is its great value. There is medical supervision, training and skill in the sport.
Some distinguished hon. Members have boxed their way to the top. A boxing blue is sitting on the Front Bench today—my hon. Friend the Member for Wells (Mr. Heathcoat-Amory), the Paymaster General—and some Opposition Members are former boxers. There is no doubt that the hon. Member for Stalybridge and Hyde (Mr. Pendry), the Opposition's spokesman on sport, and the Paymaster General have both learned to take care of themselves partly through the great sport which they enjoyed so much.
Is the House aware of the distinguished membership of the British Boxing Board of Control? It includes two hon. Members—the hon. Member for Stalybridge and Hyde and my hon. Friend the Member for Falmouth and Camborne (Mr. Coe). How could it include more distinguished sportsmen? They are not going to stand by with others on that distinguished board and see people mutilated wantonly—and they will not.
There is no doubt that boxing is a fine, well-supervised sport. This House would do ill even to contemplate abolishing it.

Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—

The House divided: Ayes 60, Noes 120.

Division No.126]
[3.56 pm


AYES


Ainger, Nick
Kennedy, Jane (Lpool Brdgn)


Alton, David
Lestor, Joan (Eccles)


Anderson, Ms Janet (Ros'dale)
Liddell, Mrs Helen


Barron, Kevin
Litherland, Robert


Battle, John
Loyden, Eddie


Benn, Rt Hon Tony
McAllion, John


Callaghan, Jim
McCartney, Ian


Clarke, Tom (Monklands W)
McNamara, Kevin


Clwyd, Mrs Ann
Mahon, Alice


Corston, Jean
Marshall, Jim (Leicester, S)


Cunliffe, Lawrence
Martin, Michael J (Springbum)


Davidson, Ian
Moonie, Dr Lewis


Eastham, Ken
Morley, Elliot


Etherington, Bill
Mullin, Chris


Fatchett, Derek
Pike, Peter L


Flynn, Paul
Prentice, Gordon (Pendle)


Foster, Don (Bath)
Primarolo, Dawn


Fyfe, Maria
Rendel, David


Galbraith, Sam
Rooney, Terry


Garrett, John
Sheerman, Barry


Gordon, Mildred
Soley, Clive


Gunnell, John
Steinberg, Gerry


Harvey, Nick
Taylor, Mrs Ann (Dewsbury)


Heppell, John
Tyler, Paul


Hill, Keith (Streatham)
Wardell, Gareth (Gower)


Hogg, Norman (Cumbernauld)
Williams, Alan W (Carmarthen)


Illsley, Eric
Wilshire, David


Ingram, Adam
Wise, Audrey


Jessel, Toby



Jones, Lynne (B'ham S O)
Tellers for the Ayes:


Jones, Nigel (Cheltenham)
Mr. Andrew F. Bennett and


Jowell, Tessa
Mr. John Home Robertson.




NOES


Adams, Mrs Irene
Brazier, Julian


Ainsworth, Robert (Cov'try NE)
Bruce, Ian (Dorset)


Alexander, Richard
Budgen, Nicholas


Allason, Rupert (Torbay)
Burden, Richard


Ashby, David
Caborn, Richard


Atkinson, Peter (Hexham)
Canavan, Dennis


Austin-Walker, John
Carlisle, John (Luton North)


Banks, Matthew (Southport)
Carrington, Matthew


Banks, Robert (Harrogate)
Carttiss, Michael


Beith, Rt Hon A J
Church, Judith


Bermingham, Gerald
Clapham, Michael


Betts, Clive
Clarke, Eric (Midlothian)


Biffen, Rt Hon John
Congdon, David


Bonsor, Sir Nicholas
Coombs, Anthony (Wyre For'st)


Booth, Hartley
Cope, Rt Hon Sir John


Bottomley, Peter (Eltham)
Cormack, Sir Patrick


Bowden, Sir Andrew
Couchman, James


Boyson, Rt Hon Sir Rhodes
Dalyell, Tam





Day, Stephen
Meale, Alan


Dicks, Terry
Miller, Andrew


Dixon, Don
Mills, Iain


Dover, Den
Montgomery, Sir Fergus


Duncan, Alan
Nelson, Anthony


Dunn, Bob
Neubert, Sir Michael


Durant, Sir Anthony
Nicholls, Patrick


Elletson, Harold
Nicholson, David (Taunton)


Emery, Rt Hon Sir Peter
Olner, Bill


Evans, David (Welwyn Hatfield)
Orme, Rt Hon Stanley


Fabricant, Michael
Parry, Robert


Field, Barry (Isle of Wight)
Patnick, Sir Irvine


Foster, Rt Hon Derek
Pearson, Ian


Gale, Roger
Pendry, Tom


Gardiner Sir George
Porter, Barry (Wirral S)


Golding, Mrs Llin
Porter, David (Waveney)


Graham, Thomas
Powell, Ray (Ogmore)


Greenway, Harry (Ealing N)
Reid, Dr John


Greenway, John (Ryedale)
Riddick, Graham


Griffiths, Peter (Portsmouth, N)
Ross William (E Londonderry)


Hall, Mike
Shersby, Michael


Hamilton, Neil (Tatton)
Skinner, Dennis


Hanson, David
Spink, Dr Robert


Hawkins, Nick
Spring, Richard


Hawksley, Warren
Stewart, Allan


Hayes, Jerry
Sutcliffe, Gerry


Heathcoat-Amory, David
Sweeney, Walter


Henderson, Doug
Sykes, John


Hendron, Dr Joe
Tapsell, Sir Peter


Hinchliffe, David
Taylor, Matthew (Truro)


Hughes, Simon (Southwark)
Thompson, Sir Donald (C'er V)


Hunter, Andrew
Tipping, Paddy


Jenkin, Bernard
Turner, Dennis


Jones, Jon Owen (Cardiff C)
Walker, Bill (N Tayside)


Jopling, Rt Hon Michael
Waterson, Nigel


Keen, Alan
Wigley, Dafydd


Khabra, Piara S
Wilkinson, John


Knapman, Roger
Winterton, Mrs Ann (Congleton)


McLoughlin, Patrick
Winterton, Nicholas (Macc'f'ld)


McMaster, Gordon
Wray, Jimmy


Madden, Max
Tellers for the Noes:


Marshall, David (Shettleston)
Mr. Brian H. Donohoe and


Martin, David (Portsmouth S)
Mr. Terry Lewis.

Question accordingly negatived.

SITTINGS OF THE HOUSE

Motion made, and Question put forthwith, pursuant to Order [19 December],

That this House, at its rising on Wednesday 5th April, do adjourn till Tuesday 18th April.—[Mr. Bates.]

Question agreed to.

Orders of the Day — Finance Bill

As amended (in the Committee and in the Standing Committee), further considered.

Clause 81

APPLICATION OF SS.63 TO 66 TO DEBTS HELD BY ASSOCIATES OF BANKS

Mr. Andrew Smith: I beg to move amendment No. 86, in page 80, line 27, leave out '1996' and insert '2000'.

Madam Speaker: With this, it will be convenient to discuss also amendment No. 82, in page 80, line 29, leave out from beginning to end of line 35.

Mr. Smith: The amendment seeks to put right the injustice which will otherwise be suffered by housing associations and universities—and, as a consequence, by tenants and students—as a result of the Government tightening the tax rules on deep discounted securities and qualifying indexed securities.
No one disputes the need for the general measure which the Government are introducing in this part of the Bill. It is, of course, wrong that financial institutions should receive the tax subsidy which they have been able to exploit simply through the way in which they structure their lending. What is at issue is the need for protection for the position of housing associations and universities, which, having undertaken borrowing in good faith on a perfectly prudent basis under the existing law, now face higher charges as the lending institutions pass on the higher costs arising from the tax change. Housing associations and universities are, in this sense, innocent victims of the more general and necessary change which the Government have made.
A number of hon. Members in the Chamber will recall that there were strong feelings on both sides of the Committee, and I recall that the hon. Member for Carshalton and Wallington (Mr. Forman) spoke with passion on the matter.
There is a strong feeling that something needs to be done on this subject. That housing associations and universities have a case was recognised by the Government. The Financial Secretary acknowledged that the original provisions of the Bill would cause "disruption"—as he described it—to the financial plans of the institutions affected, with consequent and avoidable damage to laudable objectives in social housing and higher education.
While resisting our amendment, which was seeking more sweeping exemptions for housing associations and universities, the Government tabled their own amendment to allow those bodies an additional year in which to rearrange their finances before the present favourable tax treatment is withdrawn.
Amendment No. 86 attempts to build on that Government indication of flexibility; it would simply extend the exemption period for a further four years, to five years in total, before tax treatment is changed in the case of loans to housing associations and universities.
I stress that the exemption applies only to existing borrowings. Its cost to the Government would be small, when set against the substantial £100 million in savings they are making by closing the present loophole. It is even more modest when one takes into account the knock-on effects, such as housing benefit costs, and the effect on higher education institutions.
The gains to those institutions, from the additional flexibility in rearranging their affairs which we propose, and the gains to the tenants of the schemes affected, would be considerable. Equally, if no change is made, the effect on those schemes financed by such loans would be detrimental.
In a statement, the chairman of the Committee of Vice-Chancellors and Principals, Dr. Edwards, said:
We are very disappointed that the Government has seen fit at this stage to give universities only a year in which to reorganise their finances. If they are not able to do so at the same or better rates, student rents are bound to have to rise, since most schemes have been used to finance the building of student accommodation. This is a very poor signal to universities in terms of the Government's own policy on the private finance initiative. How can universities have sufficient confidence to enter into schemes involving private finance if the Government changes the rules so suddenly?
That is the point. The rules have been changed suddenly.
One understands why it is difficult to give full warning of that sort of tax change, but we are talking of institutions that entered prudently and in good faith into borrowing arrangements, in the interests of their tenants and students, under the injunction that the Government gave them to make sensible use of private finance.
The National Federation of Housing Associations also underlined the difficulties that the change would pose for its members:
We feel strongly that the government should recognise the legitimacy of housing association and university transactions when they were set up, and should at least consider an amendment at the Report Stage to allow a significant transitional period of up to 10 years. This would allow housing associations to choose the point in the economic cycle most appropriate to go for re-financing and thus minimise the detrimental effects particularly on rents.
Those detrimental effects could otherwise be significant. Increases of between 14 and 38 per cent. were discussed in the original brief from the National Federation of Housing Associations, and universities have also forecast sharp increases. The London School of Economics has warned that the increase might be as much as £9 a week for those of their students accommodated in projects financed by the instruments, and Manchester has warned of a 7 per cent. increase in rents.
We have tabled the amendment to extend the transitional period, providing, as the National Federation of Housing Associations said, the opportunity for institutions affected to pick the appropriate time in the economic cycle to rearrange their finances. The five-year period is sensible, it is more flexible than the one year by which the Government were prepared to extend the period, and it fits in neatly with the normal minimum holding requirements imposed by the Government on qualifying indexed securities for them to qualify for favourable tax treatment in the first place.
I will be honest: we suggested five years rather than 10, which some people might have preferred as a transitional allowance, precisely because we think it more likely that the Government will be induced to accept five years, having already been coaxed towards giving the one-year exemption.
It is a good case, and I hope that the Government will accept it. It is a modest concession, but it is no doubt right in terms of natural justice, and it will make a big difference to those affected. I commend it to the House.

Mr. Nigel Forman: I do not intend to press amendment No. 82, which stands in my name, at the end of this brief debate, for reasons that I shall explain. As I initially raised this issue in Committee, I shall take a few moments to remind the House of the slightly tortuous way in which the matter has developed, and how the university world arrived at the conclusions to which it now clings.
The clause, which brings qualifying indexed securities into the tax system and closes a loophole that was exploited largely by offshore associates of certain leading financial institutions, has had a bit of a chequered history, particularly in the course of the Standing Committee's debates on qualifying indexed securities.
To begin with, certain universities and housing associations discovered that some of their private borrowing for capital expenditure purposes using those instruments would be caught by the Finance Bill as it was then drafted, which would probably leave them with extra costs which they had not anticipated. They assumed that banks and other financial institutions would probably find ways to pass those costs on to them, and that the costs would not be absorbed by the intermediaries and financial institutions.
I took some trouble to draw that problem to the attention of my right hon. Friend the Financial Secretary, and he was kind, courteous and sympathetic enough to listen carefully to the arguments put at that time by me, the hon. Member for Oxford, East (Mr. Smith) and other Committee members. He showed his customary flexibility, and persuaded my right hon. and learned Friend the Chancellor to introduce a modest concession in delaying by one year the implementation of that measure, to give universities and housing associations the necessary breathing space in which to adjust to the new tax regime.
As luck would have it, however, the Committee of Vice-Chancellors and Principals and others clearly advised me and other Committee members at that stage that, although well meant by my right hon. Friend the Financial Secretary, the concession might end up doing the sector more harm than good. They told us that, in those circumstances, only a five or possibly 10-year delay in the implementation of that tax regime would do the trick for institutions that had become involved in what are, by any standards, complex instruments.
To have their full and desirable effect, those instruments must be left in place for a considerable period, because the capital expenditure which they are intended to help finance would be incurred over a considerable period.
In the light of that background, my amendment was designed to restore the wording of the clause to what it had been before my right hon. Friend's concession, so that it would have excluded universities from benefiting from the Government's concession of one year's breathing space.
However, since I tabled that amendment, the plot has thickened, and the various interested parties in that complicated matter have reconsidered the balance of advantage and disadvantage in the existing arrangements. The financial institutions have apparently assured the university world that investors in qualifying indexed securities that are issued by universities are now prepared to clarify the terms of the deals into which they have entered in a direction favourable to the universities.
For that reason, I should place on record, for the avoidance of doubt, the press release that was issued today by the CVCP, which says about the apparent intellectual gymnastics that the issue has involved:
The CVCP has had confirmation from 9 of the 10 universities with QIS schemes that they do not now want to press for exemption from clause 81"—
as suggested in my amendment No. 82.
This was amended by the government at the Committee Stage, and gave universities (and Housing Associations) an extra year. The universities' decision follows discussions with the banks by the universities concerned and the negotiation of a concession by the banks over the increased charges which would have been involved in the one year extension.
Ideally, those universities would like to see the government concession extended for a total of five years.
That is the argument that the hon. Member for Oxford, East has made, which is covered in amendment No. 86.
However, the CVCP does say in conclusion:
The CVCP is enormously grateful to all those MPs"—
it is obviously referring to hon. Members on both sides of the House—
who have supported the principle of the universities' case in what is a very complex issue.
That general thrust of argument to which I have just alluded—in other words, the present position—has been strongly supported in faxes that have been sent to me, in the past day or two, by University college, London, the university of Bristol, the university of Sheffield, the university of Aberdeen, the university of Durham, and, of course, the London School of Economics, which the hon. Member for Oxford, East specifically mentioned.
All those institutions, I can confidently say, urge me and the House to support the position that has now been reached as a result of the Government concession, allowing that year's breathing space to remain, so that the institutions concerned may use that time to best effect to reorder their affairs, and perhaps to refinance some of their borrowing.
If you are interested in specifics, Mr. Deputy Speaker, because it is a complicated matter, I should say that the lending institutions have apparently confirmed that, in the event that the year's breathing space remains, the same beneficial borrowing rate would apply to those instruments for the extra period of grace that is now on offer, until 30 March 1996.
At the least, that welcome development would remove the financial disadvantage to universities that was threatened before the concession was made, and would provide some extra time in which they might consider the options for closing down QIS instruments and refinancing their university borrowings in other ways.
To end on a general note, some universities, as my right hon. Friend the Financial Secretary knows, have been landed in that process in something of an unfortunate muddle, and placed at potential financial hazard by the vagaries and complexities of that piece of tax legislation.
The legislation has been necessary, as the hon. Member for Oxford, East said, to close a loophole that needed closing—no one disputes that. However, something that I previously mentioned in the House has been at work—the law of unintended consequences. It has certainly applied in this case.
Virtuous and desirable changes in tax law, designed to tackle the problems thrown up by the affiliates and associates of some of the most prominent lending institutions, have had, or appear to have had, undesirable effects on two sectors of considerable interest to the House—the higher education world and the housing world. The hon. Member for Oxford, East was right to mention the end users—students and tenants.
It is a great pity that the law of unintended consequences should work in that way, because clause 81 in its original form was well directed at the problem. However, the way in which the Government could best make it up to those two sectors—were they minded to do so in future—would be to bear in mind the fact that the private finance initiative, to which the hon. Member for Oxford, East referred, is a worthwhile way forward for many parts of the public sector.
If my right hon. Friend the Financial Secretary is prepared, as I hope he is, to cling to the strong statement he made in his recent excellent speech to the Adam Smith Institute—on, I think, 27 March—I trust that he will bend every effort to ensure that the general climate within which public sector institutions seek to use private borrowed money is improved in every sensible way.
I shall quote one paragraph from my right hon. Friend's excellent speech:
The Government's commitment to the private finance initiative is absolute. Our aim is to make the PFI the procurement route of choice for all projects. In a few years' time people will wonder how it could ever have been otherwise. To drive that aim forward the Chancellor announced that in future the Treasury would not approve any capital projects unless private finance options had been explored.
I say amen to that, as does the higher education sector.
I hope that one practical consequence of the long-running and slightly complicated debate that the House and the Committee have had on the issue will be that, over the coming months, there will be opportunities for university finance officers, and perhaps housing association finance officers, to have detailed discussions with Treasury and Revenue officials to look at the robustness of any future funding arrangements that they may think of as replacements for qualifying indexed securities in due course.

Mr. Geoffrey Hoon: I have listened to the hon. Gentleman's thoughtful comments. Can he satisfy the House and say that, as part of the need to promote such arrangements between the public and private sector, perhaps the most significant necessary aspect is a consistency of tax treatment? Does he feel that, in their approach to such matters, particularly in relation to longer-term considerations affecting housing associations and universities, the Government have shown the necessary consistency in their treatment?

Mr. Forman: I certainly believe that the maximum possible stability for the tax regime in such matters is highly desirable. In defence of my right hon. Friend the Financial Secretary, may I say that I have seen copies of correspondence—not private—between him and the

university world, in which he made it crystal clear in one paragraph that, under our system, it is certainly unusual, if not practically impossible, for any Treasury Minister to give guarantees about tax decisions in a future Budget? I am afraid that that must remain the position under our quaint and familiar constitution.
In a spirit of helpfulness, I am trying to suggest to the Financial Secretary—I hope that he can follow up my suggestion, perhaps in answer to the debate and subsequently—that it may be possible to inject slightly greater certainty and stability. If that is not done, the desirable thrust of the policy of involving private finance in public sector capital projects, particularly in the two sectors that we have mentioned, will be undermined to some extent. No one on either side of the House would wish that to happen.
A constructive approach of that sort in future would help the Government and the House to restore the credibility of the approaches taken by my right hon. Friend the Financial Secretary and my right hon. and learned Friend the Chancellor to private finance. It would also lend support to the clear statement of intent that I quoted in Committee—I will not repeat it today—which was drawn from the Department for Education's document "Education means Business".
I thank my right hon. Friend the Financial Secretary for his sympathetic efforts to assist us. I underline the importance in such sectors of the greatest practical degree of tax regime stability. At the conclusion of the debate, I shall not press my amendment to a vote.

Mr. Michael J. Martin: I also urge the Minister to support the views of my hon. Friend the Member for Oxford, East (Mr. Smith). In my constituency, there are at least half a dozen community-based housing associations, as well as housing co-operatives which borrow money and are involved in joint ventures. The dedicated men and women who become involved in those committees increasingly do so after a day's work and after looking after their families, and they do an excellent job for the community.
If it had not been for the community-based housing associations in my constituency, many of the beautiful old Glasgow tenements would have been destroyed and lost for ever. Instead, there are thriving communities in tenements which have existed for many years but have now been totally refurbished inside and out. The back courts are marvellous. When the Prince of Wales was writing his book about architecture, he drew attention to some of the community-based housing association tenements in my constituency.
The big concern now is that the joint ventures with the banks and building societies mean that rents will increase. If the Minister is not prepared to promise some help today, the rents will increase further.
The Minister should know that, in at least one community-based housing association in my constituency, through no fault of the committee, 75 per cent. of the rental income is spent on administration. That is a terrible state of affairs. The association is not shrinking from the circulars produced by Scottish Homes stating that we should become involved in more joint ventures. The joint ventures in Glasgow have led to the creation of some lovely buildings, including a building that won an award for the city.
If tenants have to face rent increases every year, many tenants will be forced to consider leaving the homes that they fought to get modernised and the communities in which they fought to stay. The Minister may say, "Why don't they buy their houses?", but he will know that, in the housing association movement, more and more tenants are being required to sign what are known as assured tenancy agreements, which deny them the right to buy.
I shall not get into a debate about whether anyone should buy a house or continue renting, but if people do not have that option, and if a husband and wife both work and receive no housing benefit, there will come a point when those couples realise that it is not financially worth their while staying, and will decide to move to other accommodation. That is moving away from exactly what we have all been promoting in previous debates—family values, and communities staying together.
What is the point of community-based housing associations fighting to get property modernised so that they can keep everyone together, when the rents force people out? I do not want to see that. I am sure that the Minister does not want to see that, and I hope that he agrees to this small concession.

Mrs. Helen Liddell: I wish to take up the time of the House only briefly, primarily because of my concern about certain aspects of the Government's position on universities.
Last Friday, as a member of the court of the university of Strathclyde, I had cause to discuss with the principal and the chairman of that university the capital funding difficulties that universities are currently experiencing. I think that it is widely recognised on both sides of the House that universities—indeed, the whole higher education sector—experience periods of considerable financial difficulty.
This aspect of the Finance Bill was introduced initially for the quite laudable motive of closing tax avoidance loopholes. I believe that the legislation was aimed initially at the trading subsidiaries of banks, which were taking advantage of the laws that then existed to defer and minimise taxation on interest. However, I am concerned that the universities will suffer disproportionately as a result of the new clause. As the hon. Member for Carshalton and Warrington (Mr. Forman) pointed out, the one-year period may not be long enough to allow universities to seek alternative arrangements.
We should give our higher education institutions greater opportunities to concentrate on educational merit and on the pursuit of excellence. They should spend less time dealing with the niceties of financial management. I recognise that that is perhaps a utopian ideal, but university principals and chancellors are concerned that they are spending increasing amounts of time meeting financial arrangements.
Many principals and chancellors have spent a fair amount of time trying to honour the Chancellor of the Exchequer's requirement to seek assistance through the private finance initiative. They are doing their very best in the circumstances. However, they are deeply concerned about the impact of the clause-particularly as it relates to student accommodation.
Those hon. Members with student and student family constituents know that students are currently suffering particular difficulties. Recent events involving the Student Loans Company Ltd. have shown that many families experience great difficulty in assisting young people in higher education. All of us who do not have silver spoons in our mouths and who experienced higher education know how difficult it is to finance young people through university.
If universities are forced to build new student accommodation, and consequently increase the rent in that accommodation, it stands to reason that that higher cost will be passed on to students at a particularly difficult time in their careers. There is no reason why we should take a partisan approach to the matter before the House this evening. We must find an opportunity to reduce the impact on those sectors—the universities and the housing associations, as my hon. Friend the Member for Glasgow, Springburn (Mr. Martin) pointed out—which have been caught in the trap.
I was much taken with the point that we must allow those organisations to choose a suitable time in the financial cycle to enter the market and raise finance. If we force them to raise funds quickly, they will have no choice in the matter. I can see a situation emerging in which the universities will be frightened away from the private finance initiative and perhaps from further capital expenditure because of the stresses that are put upon them. That will mean that less student accommodation will be built, and that many students will be forced into the private rented sector.
Many of us have children who are approaching student age, and we would rather see them accommodated in university halls of residence in an environment where they were more likely to be supervised and where their transition from school to university would be made easier. Many of us have very bad memories of the private rented sector.
Some families in this country are sufficiently concerned about the kind of environment in which their student children are likely to live that they are taking out mortgages, which are placing them under enormous financial pressure. They are trying to buy accommodation, so that their children can have some security as they enter university.
Many young people in my constituency are entering university for the first time in their families' histories. Their families are deeply concerned about the kind of university environment that their children will encounter, and they would rather see them living in university accommodation.
I am convinced that, if the Government think through the amendment, they will see the logic of extending the period to five years. I echo the point made by my hon. Friend the Member for Oxford, East, that the amendment seeks to look at a period of only five years, not 10, to make it less unpalatable to the Government.
I cannot believe that right-minded Members, on both sides of the House, would wish to see universities put into a less favourable situation. Many universities are trying to do their best in creating an environment of excellence. Indeed, many are so concentrating on the capital requirements that they will have to meet in the next few years that they are having to think less about the money that will be put into teaching and into research funds.
It is unacceptable, as we reach the turn of the century, when we should look to improve the excellence in our institutions of higher education, that we are putting this unexpected burden on them. It is not a dramatic


amendment. Indeed, all the Opposition's amendments are moderate, and this is no exception. Common sense should apply, and we should ensure that the universities and housing associations are not disadvantaged unwittingly by this aspect of the proposed legislation.

Mr. Clive Betts: In Committee, we had a good debate on the clause and how it affects—in some ways inadvertently—both housing associations and universities. I do not think that it was the Government's prime intention in drafting the clause to attack and single out those two institutions for penalties under the new arrangements. Every hon. Member who spoke in Committee accepted that there was a misuse of qualifying indexed securities and deep discount securities by associates of banks, which, effectively, had been set up to gain tax advantages that the Government had never intended should be available to banks in the first place. Associates were set up to gain tax advantages that would not have been available to the banks themselves.
I listened with interest to the hon. Member for Carshalton and Wallington (Mr. Forman), who said that he would not press his amendment because he accepted that if he removed reference to universities and other such institutions, effectively they would not benefit from the concessions that the Government were going to make. I accept the logic of that argument but do not understand why the hon. Gentleman did not go on to say why he was not prepared to vote for the Opposition's amendment, which was moved by my hon. Friend the Member for Oxford, East (Mr. Smith). All that it was seeking to do was to extend the concession for a further four years to allow the deliberations and consultations to which the hon. Gentleman referred, between the banks, universities and other higher education institutions, to take place in perhaps a rather more relaxed atmosphere over a longer period.
Although I can understand that nice noises might be made behind the scenes by the banks to the universities to which they have lent money and which have issued such securities, my worry is that the banks will not come out of the negotiations without an element of profit for themselves. Perhaps they would be prepared to terminate the arrangements in a way that would be less costly to the universities and, indeed, if similar discussions take place, to the housing associations as well. Almost certainly, the costs involved in entering into new arrangements and getting out of the current arrangements will be greater than if the institutions had been able to continue with their QISs and deep discount securities for a number of years under the current arrangements with the tax reliefs that are available.
In other words, even with the Government's concession—even if they allow a breathing space for one year, as a result of which there will be negotiations on new arrangements between the current lenders and the current borrowers, or with new lenders—the costs for the institutions are likely to rise. The problem will then be that inevitably the costs will be passed on to the people who live in the properties that are being built as a result of the security arrangements. I do not understand why the hon. Member for Carshalton and Wallington did not accept that it would be much better for those institutions if they could have five years' breathing space rather than one. That seemed to be the logic of what he was saying. Perhaps he might like to reflect on whether there is still some merit in supporting the Opposition's amendment.

Mr. Forman: I am grateful to the hon. Gentleman for giving way, just so that I can tell him what was going through my mind when I argued my case. My right hon. Friend the Financial Secretary did very well in his reconsideration in Standing Committee, to be able to offer one year's breathing space. If the hon. Gentleman reflects on it, it is perhaps unrealistic to expect five years, bearing in mind the fact that that would take us well into the next Parliament.

Mr. Betts: There are, perhaps, many Conservative Members, although they are not in their places, who would willingly commit this Parliament to measures that go well into the next Parliament and would commit the future Labour Government to things that they may not want to do.
It is worth going through some of the reasons why housing associations—the area in which I am most interested—are caught in their current position. I do not think that that was the Government's primary intention, and I, like other Opposition Members, accept that the intention was to stop tax abuses by associates of banks. We support that and do not in any way want to undermine it. The arrangements for housing associations have great merit, one of which is that they are long term. By its very nature, building homes is a long-term venture and one needs long-term funding arrangements. To have to scrap one's arrangements and within a year renegotiate alternative arrangements naturally puts the borrower at a distinct disadvantage. The properties are already there. Those involved have to fund them somehow. They are not entering into funding negotiations with free hands, for a new estate of houses. The houses are already there. They need the funding to continue to pay for their properties. That puts them at a distinct disadvantage. Long-term arrangements are important to organisations in that position.
I refer to an important comment that was made earlier by my hon. Friend the Member for Ashfield (Mr. Hoon) about the nature of private sector finance. Many organisations—many are local authorities—that have tried to get involved in those arrangements will say that the greatest problem has nothing to do with ideology or negotiations between the public and private sector—where there is a proper and understood level playing field, and where organisations can sit around a table and come to arrangements to their mutual advantage—but is uncertainty. Most of that uncertainty is created not by the markets but by Government.
Those institutions do not know from one year to the next what the Government's taxation policy will be. They do not understand from a local government perspective, or, indeed, from a housing association perspective, what their vires will be. Will they have powers to do things or will they not? Governments so often change their position on those matters that it is difficult not only for the public sector but for the private sector, if they want to enter into negotiations and make arrangements of a long-term nature, to do so when they are not sure of the position that their partners will be in vis-à-vis Government policy at any one moment. That is a real problem. When the Government change their position from year to year, the financial forward plan for private and public partnerships is undermined and simply does not get off the ground in any meaningful way. That issue comes up time and again,


and the accountants involved in such ventures warn how the Government operate. I hope that the Government will learn a few lessons from that in future.
Associations have also entered into various deals; in many cases, the deals are index-linked, which suits housing associations, because their rental stream tends to go up over time as inflation takes it upwards. It is sensible to link the rental stream to a form of borrowing that is also index-linked. It is good planning and sound common sense. There are tax advantages, which, of course, make the deals attractive, but their very nature is attractive to organisations seeking to invest in a product with a long life and with an income stream that rises on a similar basis to the cost of their borrowing. Initially, tax advantages accrue to associates of banks. When they reach deals with housing associations, at least the majority of those advantages tend to be passed on to the associations and their borrowers.
In Committee, the Financial Secretary said that—although, superficially, many such deals were index-linked, the accumulated interest being paid and taxed only after a discount for inflation—a number of side deals were done. A "shadow" arrangement operated, allowing the interest rate that would otherwise have been charged—perhaps a rate linked to LIBOR, the London inter-bank offer rate—to be assessed and the difference to be paid back to the lenders. They would receive a return as if they were conducting a straightforward deal, but the deal was dressed up to enable tax reliefs to accrue.
I agree that that happens in many deals, but the Government are not seeking to outlaw such arrangements. They do not wish to abolish QISs and deep discount securities, or to abolish the tax reliefs that are available in conjunction with side deals. They merely wish to abolish such deals when they are conducted by associates of banks. Their stated policy is to encourage the development of a bond market with other institutions, and, presumably, to encourage the practices to which I have referred: that is how institutions enter the market, make profits and make their lending attractive to organisations that wish to borrow. As I said, the Government do not oppose the side deals in principle; they oppose them only when they are conducted by associates of banks.
It is not the banks that will suffer as a result of the Government's proposals, however; it is the housing associations that will suffer. Most of the deals, while giving associations the benefit of tax relief while they exist, also include clauses stating that the associations—and, of course, universities—must pick up the costs if a deal is unravelled or tax relief is not available.
The Government should question the morality of the penalty that they are imposing. I understand that, in the case of housing associations, all such deals must receive consent from the Housing Corporation. Every deal has been approved by a quango: Government appointees have vetted those deals and given them their blessing. I think it wrong for housing associations to enter into such deals—deals that the Government support in principle, despite their reservations about the involvement of associates of banks; deals that have been approved by the Housing Corporation.
Indeed, I understand that some of those deals have been approved by the Treasury. I consider it questionable, halfway through a deal that has been approved by the

Treasury, to change the ground rules—in effect, retrospectively—so that the tax reliefs on which the borrowers were counting are no longer available: in fact, to tear up the deal.
I understand and support the Government's main intention, but I feel that the organisations involved need a longer breathing space. Will the Government consider allowing five years for the continuation of arrangements entered into before the Budget announcement? I am not talking about new arrangements. Perhaps a longer period could be allowed in the case of deals that currently involve more than five years, which is the minimum in many cases. It is the minimum in the case of QISs, for instance, to make the deals worth while. Organisations need time to think about their future, to begin negotiations with banks and other institutions and perhaps to seek opportunities for the development of alternative markets as other institutions enter the field. The deals involved are complicated, and unravelling them overnight would be damaging.
We have cited rent levels in the past. Increases have been assessed by various organisations, which have produced figures ranging from £14 to £40 a week in the case of schemes caught by the arrangements that I have described. The amount depends on the finances of the organisations involved, and the way in which the deals were structured. If the Government are concerned about losing their own tax income, however, I think that what I said in Committee is still pertinent. The Nationwide building society, which produced some assessments for me, concluded that, as 78 per cent. of housing association tenants are in receipt of housing benefit and as the full cost of any rent increase resulting from the unscrambling of deals would fall on the Exchequer rather than the tenants, the Government will not gain the full benefit of any tax returns by reducing tax reliefs connected with the schemes.
The Nationwide's calculations show that in the case of 78 per cent. of tenants, the Government would lose £23 a year as a result of the difference between the tax savings and the extra benefit that they would have to pay out. Of course, in the case of tenants not in receipt of housing benefit, the Government will gain the full impact of the extra income tax that they receive, but at the expense of a widening of the poverty gap—at the expense of those who must pay the full amount of rent.
Let me return to the issue of other financial institutions. The Government seem to be saying that if other institutions wish to enter the market and issue securities, it will be possible for housing associations and, indeed, universities to switch their borrowing to those institutions—building societies, perhaps—and enter into arrangements, through QISs and discount securities, allowing them to gain the benefits that they currently gain from schemes involving associates of banks.
As has been pointed out to me by people involved in such markets, however, the problem is that they take some time to develop. It takes time for those in the other financial institutions that I mentioned to understand fully the way in which housing associations work, and to feel that they understand that well enough to lend on the basis on which banks have been prepared to lend on the past.
Associates of banks, and banks themselves, are currently the main lenders in the market. I suggest that, if other institutions were as willing to lend, they would already be in the market and lending. The five-year period proposed by my hon. Friend the Member for Oxford, East would allow a little extra time—in regard to existing


schemes—for other institutions to enter the market and offer alternatives to housing associations and universities, which could accept them on the same or similar terms to their current arrangements with associates of banks, which would have to be terminated on their current terms.
The problem at present is that those involved in the markets do not understand the nature and operations of housing associations because they have not lent to them regularly. It is therefore difficult to secure sufficient private sector funds to cover the cost of a scheme. As I pointed out in Committee, the cost of building most rented accommodation is not reflected in the valuation of such property when it is first built: the open-market valuation is likely to be only about 75 per cent. of the building cost.
Banks, because they understand housing associations, are currently prepared to lend on the basis of a fairly advantageous valuation-to-debt ratio, but many other institutions that do not know as much about housing associations are prepared to lend only on a ratio of around 150 per cent.—sometimes even higher. If the valuation-to-debt ratio on which the other institutions are prepared to lend is higher than 150, because of the relatively low ratio of valuation to building cost, the amount of the building cost that institutions are prepared to advance will be less than 50 per cent.
As we all know, one of the Government's policies in the past few years has been to reduce the amount of housing association grant that they pay on schemes, thus implicitly telling associations to increase their private finance. If the only institutions that can enter into such arrangements are not prepared to lend as much as banks—if they are prepared to lend less than 50 per cent. of the cost of building properties—that, along with the reduction in HAG, means that there may well be a gap in the funding arrangements for new housing schemes. If that gap exists, not only will rents will go up, but new schemes will not be built. That is a problem.
We are saying that there is a real difficulty for housing associations. We accept the main thrust of what the Government are trying to do, and that associates of banks have been manipulating securities for their own advantage. We want to close tax loopholes. We do not want to be seen to be stopping the Government in trying to achieve that. However, if the consequence is that housing association rents will rise steeply and that, at the same time, other institutions will have insufficient time to come into the market and start lending to associations so that there is no funding gap between HAG and private finance, would not it be better for the Government to stop, reflect and give a little more breathing space?
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My hon. Friend the Member for Oxford, East made a good case. He did not seek to undermine the impact of what the Government are trying to achieve, or to allow new schemes to get off the ground with associates of banks using the arrangements that have been available in the past. The Government should recognise that it is wrong to say to housing associations, in the middle of those arrangements, that they have only one year and that, in that year, they must either pick up the full cost of changes in the tax position under schemes' penalty clauses, or go around looking for another borrower, who may not be available on anything like the same advantageous terms.
The proposal will cost housing associations and their tenants dear. A bit of reflection and a small extension of the period during which the pre-Budget arrangements may continue would be of enormous benefit and would lead to little cost to the Exchequer. I hope that the Financial Secretary will give serious consideration to that.

Mr. Hoon: I shall endeavour not to repeat the many excellent points made by my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). He has clearly shown the essential problem addressed by amendment No. 86—the difficulty faced by housing associations and universities in adjusting to the new tax regime that was established by the Government amendment, which was accepted in Committee.
The position was well set out by the Financial Secretary in Committee. Essentially, we are dealing with a relatively small number of institutions that have taken advantage of a tax position created by the Government. About a dozen housing associations have borrowed about £150 million, and a dozen universities have borrowed about £300 million. Each of those institutions acted in good faith on the basis of tax arrangements in force at the time.
The hon. Member for Carshalton and Wallington (Mr. Forman) fairly accepted that, if we are to promote arrangements between the public and private sectors, consistency of tax treatment is essential. That is precisely what the Financial Secretary said repeatedly in Committee. He said that the Government wanted
to encourage private borrowings by universities and housing associations. That is the thrust of our policy.
I should grateful if, in reviewing the thrust of Government policy over a considerable period, he made it clear whether he really believes that the consistency advocated by the hon. Member for Carshalton and Wallington has been borne out in the way in which the Government have treated, in particular, housing associations and universities.
The nature of those two institutions dictates that what they do is in the longer term. Universities do not build student accommodation simply for this year and the next. They build such accommodation over a prolonged period. That must also be the case with housing associations, whose primary focus is aimed at providing accommodation for families and for people who are not in a position to buy their own accommodation. Such work cannot be turned on and turned off as easily as the Government might suggest.
If that in any way suggests that I am being critical of the Government's position, I should emphasise how much I agreed with the Financial Secretary in Committee, when he said:
I see some force in the argument that the immediate commencement envisaged in the Bill, backdated to the Budget, could cause disruption to the short-term financial plans of the institutions and a consequent risk of avoidable damage to our objectives both in social housing and higher education.
That is right. That is why he fairly delayed the implementation of the Government's original proposal until 1 April next year.
That was a concession. I am not arguing against that, but consistent with the Financial Secretary's comments in Committee, I wonder whether, on reflection, he feels that


the concession is sufficient to allow housing associations and universities to adjust their finance. I should be grateful if he dealt with that point. In Committee, he said:
That will give them a breathing space in which to reconsider their financial arrangements and, if they wish, to unwind the borrowings caught by the clause.
What investigations have he and the Government made of the practicalities of unwinding financial arrangements for long-term capital commitments in a relatively short time? I seriously wonder whether it is practically possible to unwind financial arrangements in the way that he suggested in Committee. That could not be done without a considerable cost to both housing associations and universities.
Labour Members have said that their concern is the cost to students and to housing association tenants in the form of higher rents. I hope that the Financial Secretary did not make those comments off the cuff to get out of the difficulty in Committee, but that the Government have investigated the ability of both housing associations and universities to unwind borrowings caught by the clause. If not, I assume that the Financial Secretary will accept the logic of what he said previously—that it is right that universities and housing associations should be given a proper period in which to adjust their borrowings.
That proper period was touched on in Committee by the hon. Member for Carshalton and Wallington, who was challenged by my hon. Friend the Member for Attercliffe to explain why he was not able today to support the thrust of the Opposition amendment. The hon. Gentleman intervened on the Financial Secretary in Committee and made it clear that
a year's breathing space … is not adequate to deal with the situation.
I was delighted to discover that he had made his position so clear in Committee. I hope that, in considering the amendment, he will accept that perhaps five years is a more sensible period in which to allow housing associations and universities to adjust their arrangements. If he does not accept the amendment's logic, he will be forced to vote for the year's grace that he said would be inadequate. I hope that, being a man of great consistency, he will follow through his position in Committee and support the amendment.
In the context of that debate, I hope that the Financial Secretary will think carefully about the matter. During the debate, he said that he saw no technical difference between the borrowings of housing associations and universities, and any other borrowing caught by clause 77. I hope that, in considering the matter fairly, as I am sure he will, he will recognise that, although technical differences may not exist, there are practical consequences for both housing associations and universities.
I hope that the Financial Secretary will not rely on the point that he went on to make in Committee, that housing associations and universities should have been on notice that they borrowed those moneys under arrangements that might be changed. He said:
That might have flashed up some warning signals to the housing associations when they entered into such an agreement that there was a possibility that the tax regime would change, with the result that they would have to bear the costs."—[Official Report, Standing Committee D, 21 February 1995; c. 426-27.]

Of course, that is precisely what has happened and it has happened because the Government sought to change the rules, originally retrospectively for housing associations and universities. However, I am pleased that the Government at least thought that the retrospective element should not apply in this instance.
The type of comment that I have just cited is most unhelpful in promoting arrangements between the public and private sectors. It is precisely such observations that cause nervous anxieties among those who are contemplating entering into such financial arrangements. If bodies think that, when the Government change the rules, they will say that they—the bodies—should have been on notice that the rules could change, it is less likely that any arrangements will be entered into. I hope that the Financial Secretary will not press the argument too far.
Clearly, we all agree that arrangements between the public and private sectors are necessary. It is also necessary that they should be fair and sensible and not "tax driven and artificial", an expression that the Financial Secretary used repeatedly in his defence of the change. However, as he is a fair-minded man, I hope that he will recognise that the changes should not have adverse, short-term consequences for institutions such as universities and housing associations. I hope that he will also recognise that if he accepted amendment No. 86, he would be providing a proper period in which such institutions could adjust their finances and make proper provision for the people whom they serve.

Mr. Gerry Sutcliffe: We are not arguing about a matter of principle, because we agree with the Government's proposals to close the loopholes, but difficulties arise for bodies such as universities and housing associations during the transitional period. The Government are suggesting 12 months, whereas we feel that five years would be more advantageous.
Universities in particular are having difficulty with funding and have had to reduce the number of courses. The university of Bradford is having tremendous problems reassessing the courses that it provides, and I imagine that others face the same difficulties. The Minister said in Committee that the Government were not attacking universities or housing associations, but, ultimately, the costs will have to be picked up by students and tenants.
The difference between the Opposition and the Government centres on the period that we consider reasonable for such institutions to be able to develop a way out of the problem. A breathing space of 12 months is inadequate, as my hon. Friends said so eloquently. I hope that the Financial Secretary will reconsider.
Housing Corporation funding for small housing associations has been reduced and many of them are in difficulties. If the Government are interested in efficiency and cost, I should have thought that they would try to support such organisations. The case for the amendment has been well made, and I hope that the Financial Secretary will take on board what has been said and stretch the breathing space to a more reasonable period.

Ms Margaret Hodge: I have a number of non-pecuniary interests that I must declare at the outset. I chair Circle 33, one of the major housing associations in London, and I am also on the governing body of the


London School of Economics and that of the university of London. I must apologise for not having heard some of the earlier contributions.
This is a sensible amendment that should be accepted by the Government because it would achieve their purpose of ensuring that we get effective private finance into some of the projects undertaken by public sector institutions. I think that the Government are cutting off their nose to spite their face in this instance, because their proposals will have a detrimental effect on their pursuit of their objective.
Had the Government consulted rather more widely, they might have avoided the adverse impact that their proposals will have on a number of higher education institutions and housing associations. Housing associations and universities have used these instruments to borrow, not to avoid taxation liabilities but to pursue their perfectly legitimate objectives. I hope that the Financial Secretary will accept that.
When housing associations first used these instruments in about 1989, they sought permission from the Government's own agency—the Housing Corporation—in the form of a section 9 consent. Instead of legislating retrospectively, it would have been appropriate for the Government to tell the Housing Corporation at that point that they thought that these forms of deep discount securities and loans were not appropriate.
5.15 pm
With his previous hat on, I think that the Financial Secretary will remember that, at that time, the Housing Corporation undertook a thorough investigation. Indeed, I should be surprised if he were not party to that investigation into the structure of the loans when housing associations first entered into them. Having given consent only four or five years ago and allowed housing associations to enter into such loans, it is not good practice for the Government now to cause housing associations additional financial problems by stopping them having the advantages provided by the loans.
Also at that time, other public bodies examined the nature of these loans. The Department of Health considered some of those where housing associations were working with health authorities, and the Treasury ensured that it was happy with the way in which the loan structures were established. At that point, no one said that such schemes were wrong or accused housing associations or universities of avoiding tax. However, by changing retrospectively the tax liabilities of such organisations, the Government are ending up with private bodies meeting public purposes.
The LSE, with which I am connected, has, through deep discount and qualifying index securities, raised about £30 million of which it has spent £16 million on new residences and £14 million on purchasing and refurbishing academic buildings. If higher education institutions cease to have the tax advantages that they currently enjoy, they will no longer be able to supply the student bed spaces that are absolutely crucial for people attending courses in inner London.
Since 1989, the housing associations have used about£130mllion: £80 million through deep discount loans—the Treasury would now lose the interest on the tax—and £50 million through qualifying index securities.
Housing associations and higher education institutions should have sufficient time to unravel their loans if they are not to suffer an adverse impact from the early introduction of the Government's proposals. I think that all parties agree with the attempt to get private finance into public bodies, and I should be astounded if the Financial Secretary were to reject such a reasonable amendment.

The Financial Secretary to the Treasury (Sir George Young): This has been a thoughtful debate and it follows an equally thoughtful debate in Committee on the equivalent of clause 81.
There is a measure of agreement among all parties. No one is arguing that housing associations and universities should be caught as from Budget day, which is the case with every other borrower affected by clause 81, and no one has argued today that housing associations and universities should be wholly exempt for ever and a day.
The debate has focused on whether the concession already announced by the Government—to postpone the impact until April next year—is the right one or whether we should have agreed to the longer one proposed by the hon. Member for Oxford, East (Mr. Smith), which expires in the year 2000. The hon. Member for Barking (Ms Hodge) said that we should have consulted, but as I think that I explained in Committee, if one is looking at anti-avoidance—this is an anti-avoidance measure—it is, by definition, difficult to consult in advance.
My hon. Friend the Member for Carshalton and Wallington (Mr. Forman) made a thoughtful speech. I pay tribute to his work as an intermediary between the Committee of Vice-Chancellors and Principals and the Government, for his active interest in the subject and for the positive proposals which he has put to the Government to take some of the tension out of the change which is now under discussion.
I take very much to heart what my hon. Friend said about the private finance initiative. I was interested to see, as I am sure was he, that the university of Lancaster has recently launched £35 million of 30-year debenture stock, which is to be listed on the stock exchange. Press reports show that it will pay interest at a fixed rate on a quarterly basis, that it is a public issue to a range of subscribers and that it is otherwise on quite straightforward terms. That is exactly the grain of what my hon. Friend talked about: genuine private finance initiative.
The features of the university of Lancaster launch are very different from those that we have discovered in clause 81. I take very much to heart what my hon. Friend said about—where it is reasonable so to do—promoting certainty and stability. If one is to do that, the designers of the schemes will equally have to put their cards on the table. If the Government proceed with the policy of pre-transaction rulings, an element of certainty will be injected.
I welcome what the hon. Member for Glasgow, Springburn (Mr. Martin) said and I join him in paying tribute to those who work for housing associations.

Mr. Forman: I apologise to my right hon. Friend for not intervening with my usual speed. He has just mentioned the possibility of the Government proceeding on the basis of pre-transaction rulings. So far as I understand the view of the university world, such an


approach would be very helpful. If he can build on that, it would go some way towards meeting the concerns which have been expressed by all hon. Members.

Sir George Young: We have already made some progress with post-transaction rulings and we have it in mind to issue—we hope—a consultative document on pre-transaction rulings later this year.
The hon. Member for Springburn, as I said, paid tribute to those in his constituency who work for housing associations and I join his tribute. I also recognise the good work done by many universities, which hon. Members have mentioned.
On the private finance initiative, I refer my hon. Friend the Member for Carshalton and Wallington to an article in the Financial Times for the weekend of 25 and 26 March, because it is exactly in line with what he was advocating. It said:
Other universities are still likely to follow"—
the university of Lancaster—
as continued expansion in student numbers puts pressure on them to borrow for capital projects.
There is reference to some 12 other universities which are still considering taking part in the initial launch. The move that my hon. Friend advocated is now under way and the Government will certainly play their part in accelerating it.
Clause 81 is directed at a growing trend for lending by banking groups to be packaged as a bilateral issue of debt securities, which are structured, often in a highly artificial way, to secure a tax advantage. The advantage goes to the lender, but part of the benefit passes to the borrower in the form of a reduced cost of borrowing. The clause removes the tax advantage. Although the first-round effect is to increase the tax liabilities of the lenders, the terms of the deals, to which the hon. Member for Sheffield, Attercliffe (Mr. Betts) referred, are such that they trigger off increases in the borrower's costs to compensate the lenders.
Perhaps I should explain briefly how the mischief that concerns us works in practice. Suppose a borrower wishes, for example, to borrow £30 million. The borrower issues a zero coupon bond, having a nominal value of £340 million, redeemable in 20 years' time. Instead of offering that issue to the market at large, the borrower issues the whole of it to a purpose-built subsidiary of a bank. The issuer gets an annual tax deduction for its accruing interest obligations, but the holder only pays tax, if at all, when the discount is realised at the bond's maturity or sale. The tax deferral substantially reduces the holder's effective charge, bringing it below the cost of conventional lending.
In addition, in many of the cases that we have seen, side agreements exist between the issuer and the bank, which allow for the bond to be redeemed on terms quite different from those specified in the terms of the issue. In practice, those side agreements convert the borrowing into London inter-bank offer rate-linked loans and thus conventional bank lending is dressed up in a complex package designed solely to secure a tax advantage that it was never intended to enjoy.
A wide range of borrowers, including housing associations and universities, have used the techniques addressed by the clause. We received a number of representations, which were discussed at length in Committee, that those particular institutions should be

made a special exemption to our proposal. I saw representatives of universities and housing associations and had constructive meetings with them, but we saw no case for exempting them totally, because the techniques used by those institutions are essentially the same as, and just as artificial as, those used by other borrowers.
I am afraid that it is not a justification for borrowers to say that those particular tax-driven loans should be excused because the funds have been applied to further public policy objectives; rather, it is the contrary. Such institutions already receive substantial support from public funds. It is essential that that should be controlled and allocated between institutions in a disciplined way and not topped up on a self-service basis by recourse to tax-motivated borrowing structures.
Moreover, failing to act now to close that particular avenue would have given rise to very substantial Exchequer costs, running into hundreds of millions of pounds over time, as universities and housing associations would have every incentive to arrange more and more of their borrowings in that way.
We did, however, see force in Committee in the argument that an immediate commencement, as in the Bill as first drafted, would disrupt the short-term financial plans of housing associations and universities and so risk avoidable prejudice to our own objectives. So, we suggested that the start date for our proposal should be deferred to 1 April 1996 in the case of pre-Budget borrowing for housing associations and universities. I am grateful to my hon. Friend the Member for Carshalton and Wallington for explaining why, on reflection, the amendment in his name does not secure any particular advantage for universities.
I shall now turn to amendment No. 86, moved by the hon. Member for Oxford, East. Even if the commencement were deferred for much longer, as the Opposition propose, the significant Exchequer costs would very often go largely as a windfall gain to the banks concerned, rather than increasing the resources available to serve our housing or higher education policies. We estimate that the cost of the amendment would be about £25 million in aggregate, but the housing associations and universities would in total gain much less. I believe that that can only reinforce the case for rejecting such a change. Such an extended deferral would be unjustified on balance, even if the fruits of it flowed through wholly to the borrowers. It makes no sense to do so if they would go to any substantial extent as a benefit to bankers.
I shall deal with the point made by the hon. Member for Attercliffe who asked why we were just blocking deals for subsidiaries of the banks. If one looks at the history of the qualifying investment securities rules, one sees that they were designed for genuine public issues to the market. If the hon. Gentleman reflects on the side deals, which are a feature of the transactions that we have been discussing, he will conclude that it would be scarcely practicable to issue those artificial side agreements in cases of public issues. It is practicable only when the issue is on a bilateral basis, such as those caught by clause 81. The banks are obviously the main candidates for such deals, but of course we shall look at the matter again if other institutions start using the technique.

Mr. Betts: Does the Financial Secretary accept that housing associations have tried—as in the case of Lancaster university, which has been successful—to go to


the markets for resources in the way that he identified as a possibility, but that the markets have not been secure about lending to housing associations? They simply do not understand the workings of housing associations and universities as well as the banks. It will take some time to build up confidence and an understanding of housing association finance, and it is that period of time which we are trying to buy through the amendment.

Sir George Young: I am not sure that I buy that argument. As the hon. Gentleman will know, many building societies, for example, lend substantial sums to housing associations. It is not the case that only the banks understand how housing associations work.
As I was saying, I looked with some sympathy at the problems that confronted housing associations and universities. The concession that the Government have offered is reasonable. There are sound arguments for not going to 2000, not least because the benefit would not go primarily to the universities or housing associations, but would be secured as a windfall gain to the banks. On the basis of those arguments, I invite the House to reject the amendment.

Mr. Andrew Smith: The significant aspect of the Financial Secretary's reply was the fact that, although he tried to argue that the housing associations and universities and their tenants would receive less benefit than the banks, he did not attempt to quantify the difference, which suggested to me that he was not altogether confident of his argument.
We have had a good debate, and I am grateful for the contributions by the hon. Member for Carshalton and Wallington (Mr. Forman) and my hon. Friends the Members for Glasgow, Springburn (Mr. Martin), for Monklands, East (Mrs. Liddell), for Sheffield, Attercliffe (Mr. Betts), for Ashfield (Mr. Hoon), for Bradford, South (Mr. Sutcliffe) and for Barking (Ms Hodge), who all showed an excellent appreciation of the importance of the issue both to tenants of housing associations and to university students in affected schemes.
The Financial Secretary said that we had had a reasonable debate, and indeed it was reasonable. I, too, acknowledge the contribution made by the hon. Member for Carshalton and Wallington. Even he did not argue against our amendment. He said that perhaps he could see why the Government were not prepared to accept it, but I have little doubt that, left to his own devices, he would have wanted to vote with us.
The debate has been reasonable, and the amendment is reasonable; the only thing that the Government have not given us is a reasonable conclusion. Those who, as a consequence, suffer rent increases, whether in housing association properties or in university accommodation, will know exactly who to blame.

Question put, That the amendment be made:—

The House divided: Ayes 256, Noes 283.

Division No. 127]
[5.30 pm


AYES


Abbott, Ms Diane
Anderson, Ms Janet (Ros'dale)


Adams, Mrs Irene
Armstrong, Hilary


Ainger, Nick
Ashton, Joe


Ainsworth, Robert (Cov'try NE)
Austin-Walker, John


Allen, Graham
Banks, Tony (Newham NW)


Alton, David
Barron, Kevin


Anderson, Donald (Swansea E)
Battle, John





Bayley, Hugh
Golding, Mrs Llin


Beith, Rt Hon A J
Gordon, Mildred


Bell, Stuart
Graham, Thomas


Benn, Rt Hon Tony
Grant, Bernie (Tottenham)


Bennett, Andrew F
Griffiths, Nigel (Edinburgh S)


Benton, Joe
Griffiths, Win (Bridgend)


Bermingham, Gerald
Grocott, Bruce


Berry, Roger
Gunnell, John


Betts, Clive
Hain, Peter


Blair, Rt Hon Tony
Hall, Mike


Blunkett, David
Hanson, David


Boateng, Paul
Hardy, Peter


Bradley, Keith
Harman, Ms Harriet


Bray, Dr Jeremy
Harvey, Nick


Brown, Gordon (Dunfermline E)
Henderson, Doug


Brown, N (N'c'tle upon Tyne E)
Heppell, John


Burden, Richard
Hill, Keith (Streatham)


Caborn, Richard
Hinchliffe, David


Callaghan, Jim
Hodge, Margaret


Campbell, Mrs Anne (C'bridge)
Hoey, Kate


Campbell, Menzies (Fife NE)
Home Robertson, John


Campbell-Savours, D N
Hoon, Geoffrey


Canavan, Dennis
Howarth, George (Knowsley North)


Cann, Jamie
Howells, Dr. Kim (Pontypridd)


Chidgey, David
Hughes, Robert (Aberdeen N)


Chisholm, Malcolm
Hughes, Simon (Southwark)


Church, Judith
Hutton, John


Clapham, Michael
Illsley, Eric


Clark, Dr David (South Shields)
Ingram, Adam


Clarke, Eric (Midlothian)
Jackson, Glenda (H'stead)


Clarke, Tom (Monklands W)
Jackson, Helen (Shef'ld, H)


Clelland, David
Jamieson, David


Coffey, Ann
Janner, Greville


Cook, Frank (Stockton N)
Jones, Barry (Alyn and D'side)


Cook, Robin (Livingston)
Jones, Ieuan Wyn (Ynys Mon)


Corbett, Robin
Jones, Jon Owen (Cardiff C)


Corston, Jean
Jones, Lynne (B'ham S O)


Cousins, Jim
Jones, Martyn (Clwyd, SW)


Cunliffe, Lawrence
Jones, Nigel (Cheltenham)


Cunningham, Jim (Covy SE)
Jowell, Tessa


Dafis, Cynog
Kaufman, Rt Hon Gerald


Dalyell, Tam
Keen, Alan


Darling, Alistair
Kennedy, Jane (Lpool Brdgn)


Davidson, Ian
Khabra, Piara S


Davies, Bryan (Oldham C'tral)
Kilfoyle, Peter


Davies, Rt Hon Denzil (Llanelli)
Lestor, Joan (Eccles)


Davies, Ron (Caerphilly)
Lewis, Terry


Denham, John
Liddell, Mrs Helen


Dewar, Donald
Litherland, Robert


Dixon, Don
Lloyd, Tony (Stretford)


Dobson, Frank
Llwyd, Elfyn


Donohoe, Brian H
Loyden, Eddie


Dowd, Jim
Lynne, Ms Liz


Dunnachie, Jimmy
McAllion, John


Dunwoody, Mrs Gwyneth
McAvoy, Thomas


Eagle, Ms Angela
McCartney, Ian


Eastham, Ken
Macdonald, Calum


Etherington, Bill
McFall, John


Ewing, Mrs Margaret
McGrady, Eddie


Fatchett, Derek
McKelvey, William


Field, Frank (Birkenhead)
Mackinlay, Andrew


Flynn, Paul
McMaster, Gordon


Foster, Rt Hon Derek
McNamara, Kevin


Foster, Don (Bath)
MacShane, Denis


Foulkes, George
McWilliam, John


Fraser, John
Madden, Max


Fyfe, Maria
Mahon, Alice


Galbraith, Sam
Mandelson, Peter


Galloway, George
Marek, Dr John


Gapes, Mike
Marshall, David (Shettleston)


Garrett, John
Marshall, Jim (Leicester, S)


George, Bruce
Martin, Michael J (Springburn)


Gerrard, Neil
Martlew, Eric


Gilbert, Rt Hon Dr John
Maxton, John


Godman, Dr Norman A
Meacher, Michael


Godsiff, Roger
Meale, Alan






Michael, Alun
Sedgemore, Brian


Michie, Bill (Sheffield Heeley)
Sheerman, Barry


Michie, Mrs Ray (Argyll & Bute)
Sheldon, Rt Hon Robert


Milburn, Alan
Shore, Rt Hon Peter


Miller, Andrew
Short, Clare


Mitchell, Austin (Gt Grimsby)
Simpson, Alan


Moonie, Dr Lewis
Skinner, Dennis


Morgan, Rhodri
Smith, Andrew (Oxford E)


Morley, Elliot
Smith, Chris (Isl'ton S & F'sbury)


Morris, Rt Hon Alfred (Wy'nshawe)
Smith, Llew (Blaenau Gwent)


Morris, Estelle (B'ham Yardley)
Smyth, The Reverend Martin


Morris, Rt Hon John (Aberavon)
Snape, Peter


Mudie, George
Soley, Clive


Mullin, Chris
Steel, Rt Hon Sir David


Murphy, Paul
Steinberg, Gerry


O'Brien, Mike (N W'kshire)
Stevenson, George


O'Brien, William (Normanton)
Stott, Roger


O'Hara, Edward
Strang, Dr. Gavin


Olner, Bill
Straw, Jack


O'Neill, Martin
Sutcliffe, Gerry


Orme, Rt Hon Stanley
Taylor, Mrs Ann (Dewsbury)


Parry, Robert
Taylor, Matthew (Truro)


Pearson, Ian
Timms, Stephen


Pendry, Tom
Tipping, Paddy


Pickthall, Colin
Touhig, Don


Pike, Peter L
Trimble, David


Pope, Greg
Turner, Dennis


Powell, Ray (Ogmore)
Tyler, Paul


Prentice, Gordon (Pendle)
Vaz, Keith


Prescott, Rt Hon John
Walker, Rt Hon Sir Harold


Primarolo, Dawn
Walley, Joan


Purchase, Ken
Wardell, Gareth (Gower)


Quin, Ms Joyce
Wareing, Robert N


Randall, Stuart
Watson, Mike


Raynsford, Nick
Wicks, Malcolm


Redmond, Martin
Wigley, Dafydd


Reid, Dr John
Williams, Alan W (Carmarthen)


Rendel, David
Wilson, Brian


Robinson, Geoffrey (Co'try NW)
Winnick, David


Roche, Mrs Barbara
Wise, Audrey


Rogers, Allan
Worthington, Tony


Rooker, Jeff
Wray, Jimmy


Rooney, Terry
Young, David (Bolton SE)


Ross, Ernie (Dundee W)



Ross, William (E Londonderry)
Tellers for the Ayes:


Rowlands, Ted
Mr. John Cummings and


Ruddock, Joan
Mr. Stephen Byers.




NOES


Ainsworth, Peter (East Surrey)
Boswell, Tim


Aitken, Rt Hon Jonathan
Bottomley, Peter (Eltham)


Alexander, Richard
Bottomley, Rt Hon Virginia


Alison, Rt Hon Michael (Selby)
Bowden, Sir Andrew


Allason, Rupert (Torbay)
Bowis, John


Amess, David
Boyson, Rt Hon Sir Rhodes


Ancram, Michael
Brandreth, Gyles


Arbuthnot, James
Brazier, Julian


Arnold, Jacques (Gravesham)
Bright, Sir Graham


Arnold, Sir Thomas (Hazel Grv)
Brooke, Rt Hon Peter


Ashby, David
Brown, M (Brigg & Cl'thorpes)


Atkins, Robert
Browning, Mrs Angela


Atkinson, David (Bour'mouth E)
Bruce, Ian (Dorset)


Atkinson, Peter (Hexham)
Budgen, Nicholas


Baker, Rt Hon Kenneth (Mole V)
Burns, Simon


Baker, Nicholas (North Dorset)
Burt, Alistair


Baldry, Tony
Butcher, John


Banks, Matthew (Southport)
Butler, Peter


Banks, Robert (Harrogate)
Carlisle, John (Luton North)


Bates, Michael
Carlisle, Sir Kenneth (Lincoln)


Batiste, Spencer
Carrington, Matthew


Bellingham, Henry
Carttiss, Michael


Bendall, Vivian
Channon, Rt Hon Paul


Beresford, Sir Paul
Chapman, Sydney


Biffen, Rt Hon John
Clappison, James


Bonsor, Sir Nicholas
Clarke, Rt Hon Kenneth (Ru'clif)


Booth, Hartley
Clifton-Brown, Geoffrey





Coe, Sebastian
Howard, Rt Hon Michael


Colvin, Michael
Howarth, Alan (Strat'rd-on-A)


Congdon, David
Howell, Rt Hon David (G'dford)


Coombs, Anthony (Wyre For'st)
Howell, Sir Ralph (N Norfolk)


Coombs, Simon (Swindon)
Hughes, Robert G (Harrow W)


Cope, Rt Hon Sir John
Hunt, Rt Hon David (Wirral W)


Cormack, Sir Patrick
Hunt, Sir John (Ravensboume)


Couchman, James
Hunter, Andrew


Cran, James
Hurd, Rt Hon Douglas


Currie, Mrs Edwina (S D'by'ire)
Jack, Michael


Curry, David (Skipton & Ripon)
Jenkin, Bernard


Davies, Quentin (Stamford)
Jessel, Toby


Davis, David (Boothferry)
Johnson Smith, Sir Geoffrey


Day, Stephen
Jones, Gwilym (Cardiff N)


Devlin, Tim
Jones, Robert B (W Hertfdshr)


Dicks, Terry
Jopling, Rt Hon Michael


Dorrell, Rt Hon Stephen
Kellett-Bowman, Dame Elaine


Douglas-Hamilton, Lord James
Key, Robert


Dover, Den
King, Rt Hon Tom


Duncan, Alan
Kirkhope, Timothy


Duncan-Smith, lain
Knapman, Roger


Dunn, Bob
Knight, Mrs Angela (Erewash)


Durant, Sir Anthony
Knight, Greg (Derby N)


Eggar, Rt Hon Tim
Knight, Dame Jill (Bir'm E'st'n)


Elletson, Harold
Knox, Sir David


Emery, Rt Hon Sir Peter
Kynoch, George (Kincardine)


Evans, David (Welwyn Hatfield)
Lait, Mrs Jacqui


Evans, Jonathan (Brecon)
Lang, Rt Hon Ian


Evans, Nigel (Ribble Valley)
Lawrence, Sir Ivan


Evans, Roger (Monmouth)
Legg, Barry


Evennett, David
Lennox-Boyd, Sir Mark


Faber, David
Lestor, Joan (Eccles)


Fabricant, Michael
Lidington, David


Fenner, Dame Peggy
Lightbown, David


Field, Barry (Isle of Wight)
Lilley, Rt Hon Peter


Fishbum, Dudley
Lloyd, Rt Hon Sir Peter (Fareham)


Forman, Nigel
Luff, Peter


Forsyth, Rt Hon Michael (Stirling)
Lyell, Rt Hon Sir Nicholas


Forth, Eric
MacKay, Andrew


Fowler, Rt Hon Sir Norman
Maclean, David


Fox, Dr Liam (Woodspring)
McLoughlin, Patrick


Fox, Sir Marcus (Shipley)
McNair-Wilson, Sir Patrick


Freeman, Rt Hon Roger
Maitland, Lady Olga


French, Douglas
Malone, Gerald


Fry, Sir Peter
Mans, Keith


Gale, Roger
Marland, Paul


Gallie, Phil
Marshall, John (Hendon S)


Gardiner, Sir George
Martin, David (Portsmouth S)


Garnier, Edward
Mellor, Rt Hon David


Gillan, Cheryl
Merchant, Piers


Goodlad, Rt Hon Alastair
Mills, lain


Goodson-Wickes, Dr Charles
Mitchell, Andrew (Gedling)


Gorman, Mrs Teresa
Mitchell, Sir David (NW Hants)


Gorst, Sir John
Moate, Sir Roger


Grant, Sir A (SW Cambs)
Monro, Sir Hector


Greenway, Harry (Ealing N)
Montgomery, Sir Fergus


Greenway, John (Ryedale)
Needham, Rt Hon Richard


Griffiths, Peter (Portsmouth, N)
Nelson, Anthony


Hague, William
Neubert, Sir Michael


Hamilton, Rt Hon Sir Archibald
Newton, Rt Hon Tony


Hamilton, Neil (Tatton)
Nicholls, Patrick


Hampson, Dr Keith
Nicholson, David (Taunton)


Hannam, Sir John
Norris, Steve


Haselhurst, Alan
Onslow, Rt Hon Sir Cranley


Hawkins, Nick
Ottaway, Richard


Hawkstey, Warren
Page, Richard


Heald, Oliver
Paice, James


Heath, Rt Hon Sir Edward
Patnick, Sir Irvine


Heathcoat-Amory, David
Patten, Rt Hon John


Hendry, Charles
Peacock, Mrs Elizabeth


Heseltine, Rt Hon Michael
Pickles, Eric


Higgins, Rt Hon Sir Terence
Porter, Barry (Wirral S)


Hill, James (Southampton Test)
Porter, David (Waveney)


Hogg, Rt Hon Douglas (G'tham)
Portillo, Rt Hon Michael


Horam, John
Powell, William (Corby)


Hordem, Rt Hon Sir Peter
Rathbone, Tim






Redwood, Rt Hon John
Tapsell, Sir Peter


Renton, Rt Hon Tim
Taylor, Ian (Esher)


Richards, Rod
Taylor, John M (Solihull)


Riddick, Graham
Taylor, Sir Teddy (Southend, E)


Rifkind, Rt Hon Malcolm
Temple-Morris, Peter


Robathan, Andrew
Thomason, Roy


Roberts, Rt Hon Sir Wyn
Thompson, Sir Donald (C'er V)


Robertson, Raymond (Ab'd'n S)
Thompson, Patrick(Norwich N)


Robinson, Mark (Somerton)
Thomton, Sir Malcolm


Roe, Mrs Marion (Broxbourne)
Thumham, Peter


Rowe, Andrew (Mid Kent)
Towned, John (Bridlington)


Rumbold, Rt Hon Dame Angela
Townsend, Cyril D (Bexl'yh'th)


Sackville, Tom
Tracey, Richard


Scott, Rt Hon Sir Nicholas
Tredinnick, David


Shaw, David (Dover)
Trend, Michael


Shaw, Sir Giles (Pudsey)
Trotter, Neville


Shephard, Rt Hon Gillian
Twinn, Dr Ian


Shepherd, Colin (Hereford)
Vaughan, Sir Gerard


Shepherd, Richard (Aldridge)
Waldegrave, Rt Hon William


Shersby, Michael
Walden, George


Sims, Roger
Walker, Bill N Tayside


Skeet, Sir Trevor
Waller, Gary


Smith, Tim (Beaconsfield)
Wardle, Charles (Bexhill)


Soames, Nicholas
Waterson, Nigel


Spencer, Sir Derek
Watts, John


Spicer, Sir James (W Dorset)
Wells, Bowen


Spicer, Michael (S Worcs)
Whitney, Ray


Spink, Dr Robert
Whittingdale, John


Spring, Richard
Widdecombe, Ann


Sproat, lain
Wiggin Sir Jerry


Squire, Robin (Hornchurch)
Wilkinson, John


Stanley, Rt Hon Sir John
Wilshire, David


Steen, Anthony
Winterton, Mrs Ann (Congleton)


Stephen, Michael
Wolfson, Mark


Stem, Michael
Wood, Timothy


Stewart, Allan
Yeo, Tim


Streeter, Gary
Young, Rt Hon Sir George


Sumberg, David
Tellers for the Noes:


Sweeney, Walter
Mr. Derek Conway and


Sykes, John
Mr. David Willetts.

Question accordingly negatived.

Clause 82

RELIEF FOR POST-CESSATION EXPENDITURE

Amendment made: No. 14, in page 83, line 28, leave out 'substitute' and insert 'insert'.—[Sir George Young.]

Clause 83

EMPLOYEE LIABILITIES AND INDEMNITY INSURANCE

Mr. Matthew Carrington: I beg to move amendment No. 87, in page 84, line 20, at end add 'of insurance'.

Madam Deputy Speaker (Dame Janet Fookes): With this, it will be convenient to discuss the following amendments: No. 88, in page 85, line 49, leave out from '(8)' to end of line 7 on page 86 and insert—
'Where it would be unlawful in the United Kingdom for a liability of a particular description or costs or expenses of a particular description to be indemnified or paid under or in consequence of a contract of insurance, no deduction may be made under this section in respect of:

(a) the discharge of any liability of that description;
(b) any costs or expenses of that description.'.


No. 89, in page 86, line 10, at end add—
'(10)(a) For the purposes of this section where a company ("the first company") effects a contract of insurance extending to any other companies in relation to which it can lawfully effect such contract and that contract would if confined to the first company be a qualifying contract of insurance it shall be a qualifying contract in relation to those other companies also and any liability arising in relation to any or all of those other companies shall if it would be qualifying liability in relation to the first company had it arisen in relation thereto also be a qualifying liability in relation to those other companies.
(b) This subsection shall apply to any payment made to a taxpayer by the company referred to as the first company in (a) above even if no contract of insurance was actually taken out as envisaged in (a) but would have come within (a) had such contract been taken out'.

Mr. Carrington: The amendments are designed to clarify some of the problems in clause 83. The clause is very welcome, and the subject with which it deals was debated extensively last year in Committee. My right hon. Friend the Financial Secretary has moved a considerable way to meet the needs of industry and the insurance business.
There are some problems with the clause that worry employers and insurers. My amendments are designed to tease out some explanations of the Government's intentions, and they may highlight some of the problems that are foreseen in the implementation of the clause. My amendments were suggested by the CBI and are supported by the British insurance industry. Consequently, they are designed to clarify some of the difficulties in the minds of employers and insurers.
I will go through the intention of the amendments briefly; my right hon. Friend the Financial Secretary may be able to express a view on the intention of the clause in three specific regards. Will he reconsider the clause in the light of experience as it settles down and as the provisions of directors' and officers' liability insurance become more readily used in the market?
Under clause 83, the insurance contract must be separate for it to qualify for tax relief. Furthermore, the contract must be unconnected with any other contract. The problem is that policies are usually associated with the contract of employment of the individual. That is not so much for the benefit of the employer, but for the protection of the employee so that he has some assurance that his employer has taken out the right insurance cover to enable his interests to be protected.
As the clause stands, it seems that that would not be permitted. It would be necessary for a company or an employer to take out separate insurance, which seems to be unnecessarily bureaucratic. I understand that it is important to have some anti-avoidance provision in the clause, but the current wording is unduly restrictive. Is it the Government's intention that employees and employers should take out completely separate insurance policies, or could they still be linked to a contract of employment, which is the normal practice in the industry?
Amendment No. 88 is designed to clarify the intention of the clause, which at present concentrates on whether it is lawful for an employer to take out insurance. Where it is unlawful for an employer to take out insurance, tax relief will clearly not be available. The amendment is designed to carry on excluding uninsurable liabilities and liabilities against which it is illegal to insure. It is possible to imagine a situation where an employer would not be able to take out insurance for one reason or another. The


employer might not be able to do so for legal reasons as much as for anything else but, because of the nature of the liability being insured, the employee could take out insurance in his or her name.
As the clause stands, it appears that if an employer cannot take out insurance, an employee cannot do so in his or her name either. The employee would, therefore, lose the tax deductibility. Clearly, that is undesirable in the sense that an employee would want cover against the risks and, regardless of the position of the employer, should be able to have that cover as though he or she were any other employee of the organisation.
My amendment is designed to enable that to happen. It moves the restriction from the nature of the employer to the nature of the insurable risk. If the risk is one against which it is illegal to insure, it would not qualify for tax deduction. If it is legal but the employer cannot legally insure against it, the employee could still do so.
I should be grateful if my right hon. Friend would clarify the Government's intentions and say whether my interpretation of the clause is correct, or whether the insurance industry is being unduly pessimistic in its interpretation.
Amendment No. 89 is much more simple and covers the problem caused by groups of companies. It is not unusual for employees of the parent company in a group, or of one of its subsidiaries, to be paid by the company that directly employs them, but to serve as a director or in other capacities with other group companies on an unpaid basis. Nevertheless, they take on responsibilities that mean that they should be able to cover themselves with directors' and officers' liability insurance. As the clause stands, it appears that the group would not be able to take out insurance cover for employees on a group-wide basis. Each subsidiary would have to take out separate insurance to cover the one employee who might have multifarious responsibilities throughout the group. I am thinking of a group of companies in which a director of the main board might be employed by and paid as a director of that board, but might serve as a director on any number of other boards in the group. It would seem ridiculous for the subsidiary companies to have to take out separate insurance.
If my interpretation of clause 83 is correct, it seems unduly restrictive. I should be grateful if my right hon. Friend the Financial Secretary could clarify whether that was the intention and my interpretation is correct or whether the industry is again unduly concerned and has no real reason to worry.
I am aware that the problems that I have highlighted are problems of detail in a clause that is greatly welcomed and will simplify the situation for directors' and officers' liability insurance. I am looking for some reassurance and comments from my right hon. Friend the Financial Secretary. Implementation of the clause is likely to be somewhat complex within the insurance industry, however, and I would be grateful for my right hon. Friend's assurance that he will ensure that his officials work closely with the industry during the implementation period to ensure smooth running and to ensure that any unforeseen problems are sorted out with the minimum of difficulty.
Will my right hon. Friend assure us that, if problems cannot be sorted out and it is felt that the clause is unduly restrictive to the insurance industry or employers, the Inland Revenue will keep the matter under review and that, if the problems need to be rectified and legislation is the only means of doing so, necessary legislation will be introduced in next year's Finance Bill?
The clause is widely welcomed. The Government have gone a long way towards meeting the worries of employers in the insurance industry, but I should be grateful if my right hon. Friend could put the final bells and whistles on an otherwise excellent measure.

Sir George Young: I am grateful to my hon. Friend the Member for Fulham (Mr. Carrington) for his comments on clause 83 and for the role that he played in getting the reform on to the statute book. I will briefly try to put some bells and whistles on the clause.
I will deal with the three amendments in the order in which my hon. Friend the Member for Fulham did so. I understand his concern that the provisions regarding connected contracts might have been drawn too widely. They are drafted to prevent abuse of the new relief. One obvious example would be when two insurance contracts are taken out, but only one relates to liability insurance and the premiums on the liability insurance policy are artificially weighted to inflate the amount that qualifies for relief.
Amendment No. 87 would still permit those anti-avoidance provisions to operate if both connected policies were contracts of insurance. We have carefully considered whether we could accept the limitation that my hon. Friend proposes, but I am afraid that there would still be scope for abuse of the relief by using contracts other than insurance contracts. For example, an insurance company might provide free cars or holidays for directors of a company under one contract, in return for an inflated premium for liability insurance taken out by the client company for its directors under a connected non-insurance contract. Such arrangements are by no means inconceivable.
The approach of preventing abuse via connected contracts generally, and not merely via contracts of insurance, is precisely that adopted under the private medical insurance relief that we introduced, which has been operating successfully.
I reassure my hon. Friend the Member for Fulham that the provisions are not intended to disqualify insurance contracts taken out alongside a director's or employee's ordinary contract of employment. I have already given my hon. Friend such an assurance in correspondence and I am happy to repeat it to the House. That approach will be incorporated in guidance about the relief, which the Inland Revenue will issue in due course.
I cannot recommend that the House should accept amendment No. 87, but I hope that the assurances that I have given my hon. Friend the Member for Fulham about the way in which the provision will be interpreted will help to meet the concerns that he expressed.
I understand my hon. Friend's continuing concern about the provisions covered by amendment No. 88. He raised the matter in a debate on a similar amendment in Committee and has since been good enough to write to me on the subject. I hope to be able to show that the provision as drafted already meets our policy objectives and to reassure him that his amendment is not necessary.
The guiding principle in clause 83 is to give relief for all work-related liabilities, costs or expenses that can be insured against lawfully. It would be wrong to give relief for costs arising from criminal convictions, so fines and penalties imposed on a director or an employee for a criminal offence, which cannot legally be insured against on public policy grounds, will not be within the scope of this relief. The costs of defending a criminal case, however—whether or not the defence is successful—are lawfully insurable and will be covered under the new relief.
The clause rules out any contract of insurance covering liabilities, costs or expenses into which it is unlawful for a person—an employer—to enter. In contrast, amendment No. 88 would consider the legality of the indemnity against the liabilities, costs or expenses. The approach in the existing provision is preferable because it may not be simple to decide whether an indemnity per se against the liabilities, costs or expenses is lawful, irrespective of who has entered into the contract. It is relatively straightforward, however, to decide whether the person entering into the contract, such as a company, has done so lawfully. Moreover, that is the approach adopted in the Companies Acts and Building Societies Acts as regards whether a company or building society may lawfully purchase and maintain liability insurance for its directors or officers.
That general issue was the subject of debate in Committee. Since then, a further concern has been raised with the Inland Revenue about the scope of the term "unlawful" in this context. That is, whether it would rule out contracts which, although not generally illegal, may be outside the scope of an employing company's powers as set out in its articles of association or internal rules. I am advised that that is not the intention of the provision, nor will it be interpreted by the Inland Revenue in that way. What would be at issue, if the point arose, would be the lawfulness of the contract under UK law generally. I hope that this will provide reassurance for my hon. Friend. On that basis, I hope that he will withdraw the amendment.
I understand that amendment No. 89 seeks to ensure that relief would apply in situations that typically involve a group of companies, where liability insurance is taken out by one company for the group. I reassure my hon. Friend that clause 83 already achieves that, so I do not recommend that the House adopts it.
Clause 83 gives relief for directors and employees, regardless of who effects the contract of insurance. Thus, relief is available where one company in a group takes out insurance covering the employees of another company in the same group, or where an unrelated third party effects the insurance contract. Similarly, where an individual incurs expenditure on uninsured liabilities relating to his work, and that is reimbursed, any tax charge would be cancelled by the relief provided by the clause.
6 pm
For example, an employee or director working for several group companies on whose behalf sums were paid out under a policy covering the whole group for a liability that he had incurred from his employment with one company would betreated as receiving emoluments of that amount from that company. But that would be

matched, under the relief provided by the clause, by a tax deduction against those emoluments of an equivalent amount.
In respect of the last two assurances for which my hon. Friend asked, of course we shall keep the matter under review as it beds down and my officials will continue to work closely with representatives of the insurance companies and others, with whom they already enjoy a close relationship. Against that background, I hope that my hon. Friend will not feel moved to press the amendment to a Division.

Mr. Carrington: I am grateful to my right hon. Friend for those comments. His reassurances will be welcomed by the industry. As there will inevitably be some lingering doubts about how the clause will work in practice, I am glad that the issue will be kept under review. With that in mind, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 86

DEFERMENT OF BALANCING CHARGES IN RESPECT OF SHIPS

Mr. Nigel Waterson: I beg to move amendment No. 2, in page 91, line 48, leave out 'three' and insert 'six'.

Madam Deputy Speaker: With this, it will be convenient to discuss also the following amendments: No. 3, in page 92, line 23, leave out 'three' and insert 'six'.
No. 4, in clause 88, page 96, line 28, leave out 'three' and insert 'six'.
No. 5, in page 96, line 37, leave out 'three' and insert 'six'.
No. 6, in page 96, line 47, leave out 'three' and insert 'six'.

Mr. Waterson: As I did in Committee, I declare a sort of interest, in that I am a solicitor who, for many years, has specialised in maritime law. Sadly, the number of British clients for whom I have worked over the years has steadily declined.
The original announcement by my right hon. and learned Friend the Chancellor was much welcomed, not only by myself and other hon. Members who support the cause of British shipping, but by all the major British shipping organisations. It is, however, important to get the details right and ensure that roll-over relief is as available as possible to a wide cross-section of British shipping.
I pay tribute to the efforts of my right hon. Friend the Member for Worthing (Sir T. Higgins), who is in his place, and my hon. Friends the Members for Pudsey (Sir G. Shaw), for Dover (Mr. Shaw) and for Croydon, South (Mr. Ottaway)—the latter is also in his place—for putting forward the arguments for British shipping, not only this year but in previous years, and to all other right hon. and hon. Members who take a similar view.
The amendment that I originally proposed in Committee sought to make roll-over relief available for a period of seven years. That has become a period of six years in the amendments before us. In any case, it is designed to be a significant improvement on the original period of three years announced by my right hon. and learned Friend the Chancellor. His announcement was that capital allowance balancing charges for ships would be allowed to roll over for a period of up to three years from


the date on which a ship was disposed of, and that that would be set off against subsequent expenditure on ships within that period. He said:
competitively, tax measures available overseas put our ship owners at a particular disadvantage".
I echo those words today.
Most ships have a long and useful working life, in some cases significantly more than 20 years. When an owner trades a ship on the charter market, particularly the spot market, commercial success in the long run often depends on the crucial decision of when to buy or sell that asset. By introducing roll-over relief in this form, the Government recognised the need to help British shipowners to make rational decisions of that sort—when to buy and when to sell—based not on the need to avoid taxes but on commercial considerations and market expectations.
That is the nub of the issue. At three years, the period of the relief was simply not long enough to allow a totally rational decision to be made based on the state of the market at that time. In some circumstances, it would encourage British shipowners to make tax avoidance decisions rather than profit-maximising and investment decisions.
Cycles in the shipping market extend well beyond three years. To recognise the harsh realities of the international shipping market, UK shipowners must be allowed to exploit shipping cycles in exactly the same way as their major competitors in other countries, such as Greece, do year in, year out, and invest in ships when the market dictates rather than prematurely because of those considerations. I am delighted that, as a result of those discussions and representations, my right hon. Friend the Financial Secretary has listened and is prepared to accept the amendments.
May I put down a marker for two related issues, which were touched on in Committee and may be matters for on-going discussions with the Chamber of Shipping and in the House in future years? The first is group relief. Modern shipping is based on groups of companies and lending institutions' need for so called "clean" companies, or when new buildings are bought via their original owning company. Currently, only the same company that has sold a vessel is permitted to use roll-over relief for new investment. That is unduly restrictive.
The second issue is that of foreign connected parties. International groups are typical in shipping. Naturally, robust precautions are necessary against abuse, but to force a shipowner to invest in unconnected tonnage when his group has something more commercially desirable to do would be unproductive and uncommercial—in short, a distortion.
British shipping is not a sunset industry looking for handouts from the taxpayer. All it asks is the removal of unfair advantages enjoyed by its foreign competitors, or measures to match those advantages. A vibrant, successful and growing British fleet is not only an absolute good in itself but an essential underpinning for the continued success of the City of London, the British economy and Britain's defences.

Ms Hilary Armstrong: I congratulate the hon. Member for Eastbourne (Mr. Waterson) on his persistence and determination to turn the

Government's mind. It is interesting to note that, if the hon. Gentleman is right and the Government intend to concede, we will have managed to have concessions in almost every part of the Bill. That is remarkable for a Finance Bill. It suggests a listening Government who are slightly anxious about things.
I notice that one of the signatories to the amendment, the hon. Member for Dover (Mr. Shaw), is not in his seat. However, we read in the newspapers this morning where he would be at 6 o'clock this evening—meeting the Chancellor, arguing for tax cuts. The way in which Conservative Members cope with, on the one hand, arguing for tax cuts and, on the other hand, arguing for increased public expenditure is interesting. We welcome the hon. Member for Dover to those contradictions. Perhaps it is politic of me to say no more about that.
I congratulate the hon. Member for Eastbourne on his determination to improve the ability of shipping organisations to increase the number of ships built in this country, for which the Opposition have fought hard. We have also argued, and will continue to argue, for an increase in the number of merchant seamen who come from this country. Both those issues are important to us.
My hon. Friend the hon. Member for Stoke-on-Trent, North (Ms Walley) has argued vociferously on both those issues, as have two of my neighbours, my hon. Friends the Members for Wallsend (Mr. Byers) and for Newcastle upon Tyne, East (Mr. Brown).
My hon. Friends the Members for Wallsend and for Stoke-on-Trent, North are both in their seats. I am sorry that my hon. Friend the Member for Newcastle upon Tyne, East is not here. He spent many a long year and many a long hour on the Finance Bill, and he is beginning to wonder what on earth has happened that has meant that this year, since he ceased to be a member of the Finance Bill Committee, we have managed to wrench so many concessions out of the Government. There may be a lesson somewhere in that.
The crucial importance of these yearly debates has been that they have taken place while merchant shipping in this country has deteriorated significantly. Indeed, my hon. Friends the Members for Wallsend and for Newcastle upon Tyne, East have witnessed the real effect of the deterioration of British merchant shipping and British Navy shipping; they have witnessed the demise of shipbuilding on the Tyne in the region that they represent.
The arrival in Southampton this week of the magnificent new cruise ship, Oriana, was heralded by cries of, "Why did that ship have to be built outside the United Kingdom?" It was also heralded by statements by shipowners that they believed that never again would a ship of such size be built in British waters.
It is an incredible indictment of the Government that it is now being said that this country, which at one time was able to build the finest ships in the world and was noted for them throughout the world, will not be able to build ships of that nature in future. We have the skills and the expertise, we have the rivers, but we now no longer have the capacity in our yards to do that type of work. It is a tragedy, and the Government will for ever be indicted for that legacy.
I am delighted that the Government have conceded—I understand that the Minister is to concede—on these amendments. However, I would ask the Minister what he estimates will be the cost to the public purse of the


concessions, and what the Government will do to monitor their effect. There are two criteria against which Opposition Members believe that any concessions should be judged—first, the increase in the number of ships that are built in British yards and, secondly, the increase in the number of merchant seamen who come from the United Kingdom.
Concessions from the British taxpayer are important if they are able to produce increased productivity for British shipyards and increased activity for British merchant seamen. It is important that, if we are agreeing increased money from the British taxpayer, we know that that money will be used in the right way and will be spent on meeting those ends.
What steps will the Financial Secretary take to monitor progress? In Committee, the Government argued both that such a change was not necessary and that, if those concessions were made—certainly the second one—they might amount to a tax loophole. I should be interested to know whether the Government have any other opinions that do not relate to the fact that five Conservative Back Benchers have signed the amendment, and whether it was that or the arguments that persuaded them. I am sure that it was the arguments, and I am sure that the Minister would not be tempted to admit that it was anything else.
6.15 pm
Shipping is in a poor condition. We have an enormous amount to make up. I hope that the Government are seriously considering how they can ensure that more ships are built in British yards and that there is a resurgence in the British merchant shipping industry.
We welcome the concessions that the Minister is making, but I hope that he will monitor them to ensure that they will herald a resurgence in British shipping.

Sir Terence Higgins: I begin by congratulating my hon. Friend the Member for Eastbourne (Mr. Waterson) on the way in which he has pursued those matters in Committee and on moving the amendment. I hope that I shall be able to congratulate the Government on accepting the amendment that he has moved.
I would add a word or two about the remarks made by the hon. Member for Durham, North-West (Ms Armstrong). I spent about seven years in the shipping industry, a considerable time ago. It is important to distinguish between the shipbuilding industry and the shipping industry; the hon. Lady confused the two. Many of the problems from which the shipping industry—that is to say, the ship operators—has suffered have resulted from the extent to which the shipbuilding industry throughout the world has been subsidised and excess capacity created.
I found it extraordinary that the hon. Member for Durham, North-West should somehow seek to blame the decline in the shipbuilding industry on the present Government, because it took place a long time ago—as long ago as when I was in the ship-operating industry. The reason for the decline was largely the appalling restrictive trade practices that were to be found on the trade union side in that industry. That was what affected the industry.
As my right hon. and hon. Friends on the Front Bench will know, especially the Minister of State, Treasury, that matter has been coming up in Finance Bills year after year. It has taken us a very long time to obtain a

satisfactory outcome, although I welcome the fact that the Chancellor last year announced that he was going to introduce clauses broadly on the lines of clause 86 and the subsequent clauses, which now extend for more than 11 pages of carefully drafted legislation.
I very much welcome the fact that, at that stage, the Chancellor had accepted the case for roll-over relief. I was surprised, therefore, to discover from the subsequent statements and the legislation now before us that it was restricted to three years. One knows very well, from one's own experience in the industry, that the cycle in the shipping industry—it is essentially a cyclical industry—extends for much longer than three years. Therefore, the fact that my hon. Friend the Member for Eastbourne moved an amendment to make it six years-which I understand the Government will accept—is very welcome.
A three-year arrangement would have had little effect, whereas a six-year period gives a reasonable opportunity for British shipowners to reinvest money in line with the market movements in the trade, to be able to sell at the top end of the trade and, one hopes, buy at the bottom end of the cycle.
I shall add a word or two to what has been said about group relief. I hope that my right hon. Friend the Financial Secretary will not think that, in asking for group relief, I am being like Oliver Twist and asking for more and more. If one has any regard for the structure of the British shipping industry, group relief must be an intrinsic part of roll-over relief.
In the same way that making the period three years instead of six would have greatly restricted the roll-over relief, given the industry's structure, not having group relief would greatly reduce the effectiveness of the measure, which I understand my right hon. and learned Friend the Chancellor and his colleagues now accept. Many shipping companies are one-ship companies and operate as part of a group, with various subsidies. Unless group relief is given, the general relief will be considerably restricted.
I understand that subsequent discussions with the industry have highlighted some difficult drafting points in relation to group relief. Given the length of time that the matter has been under discussion, that is extraordinary. I should have thought that the issue would have been sorted out before now. I hope that my right hon. Friend will say that he will consider the group relief aspect of what is essentially a part of the change in roll-over relief, or its effect will be greatly diminished.
There has always been another amendment related to the 100 per cent. first year allowances. I accept that it would be difficult for the Government to make that concession as the repercussions in the industry would be considerable—even though it would help the liner trade, whereas the group of amendments that we are discussing largely helps the tramp trade. But if we accept that the Government are not prepared to countenance first year allowances—I well understand the reasons for that—the Government must redouble their efforts to prevent other Governments acting to give their shipping industries a competitive advantage.
The French still have subsidies for ship investment and fleet modernisation. The Germans give considerable reliefs. In Greece—the most extreme example—shipping companies pay no corporation tax. My right hon. Friend the Financial Secretary will be as familiar as I am with


the range of devices used by other countries to give their shipping companies a competitive advantage over British shipping.
I hope that my right hon. Friend will cover the group relief issue—which is very much the limit of what the Government have in mind for the shipping industry. My right hon. Friend must redouble his efforts, perhaps at the intergovernmental conference or in negotiations with other European Union countries, to get rid of the appalling discrimination that occurs in other countries, and establish a level playing field.
I congratulate my hon. Friend the Member for Eastbourne, and hope that the Financial Secretary gives us a positive response.

Ms Joan Walley: I shall be brief, as I know that other hon. Members wish to speak, and we have to make progress.
We welcome the concession that we believe the Financial Secretary is about to make. As my hon. Friend the Member for Durham, North-West (Ms Armstrong) said, if the concession is made, it will be welcomed on both sides of the House.
The amendment did not come about by accident, but because a joint campaign has been waged by the trade unions—by the National Union of Rail, Maritime and Transport Workers and NUMAST, the National Union of Marine, Aviation and Shipping Transport Officers—working in partnership with the Chamber of Shipping. The campaign also received cross-party support. It is amazing what can be achieved when there is an ever-reducing number of Conservative Members. There are still people who want to see the shipping industry take advantage of the opportunities that exist worldwide. We want the British industry to take advantage of those opportunities.
I have a sense of déjagrave vu, because, almost a year ago when we last discussed the subject, it seemed that we would never achieve a breakthrough and persuade the Government to concede the issue of roll-over relief. Those of us who were so involved in the campaign this time last year felt that what happened then was only a beginning.
If the Government make a concession today, it will be welcome, but just as we have made progress on last year, we should now ensure that there is a close partnership, including not just the Treasury but the Department of Trade and Industry, where there are opportunities to assist new shipbuilding, the Department of Employment, where there are opportunities to create new jobs for British seafarers, and the Department of Transport, where there is currently a debate on transport.
We must put shipping at the centre of transport policy, and see what opportunities exist. I want the concession to be not a once-and-for-all concession, but the start of a transport policy that recognises the role of British shipping and the part that British seafarers have to play in that role.

Mr. Richard Ottaway: If the hon. Member for Stoke-on-Trent, North (Ms Walley) wanted to help British shipping, it is a shame that she did not support the proposal for an open register made last year.
I declare an interest as parliamentary adviser to the Baltic exchange. While my hon. Friend the Member for Eastbourne (Mr. Waterson) argues largely on behalf of the Chamber of Shipping, the Baltic exchange speaks for the service sector of the British maritime sector. My right hon. Friend the Member for Worthing (Sir T. Higgins) spoke of the difference between shipowning and shipbuilding. There is a third element: the service sector, which exists behind London as a maritime centre.
While the British fleet is small—I suspect that the overall cost of the amendment would not be huge—the maritime sector in the City of London is large. It comprises brokers, bankers, lawyers, underwriters, P and I executives and a huge number of people who work in the centre of British shipping, making London the maritime centre of the world. The maritime sector earns huge invisible exports for this country.
I believe that, when discussing subsequent Finance Bills, we may have to return to the subject of the ways in which the maritime service sector can be consolidated in its position as the world's premier maritime centre. Other centres are already trying to become competitive and undermine our leading position. It is essential that we consolidate our position at the centre of world shipping.
It is clear that we need a viable home fleet. I know that I speak for the service sector in the City of London in supporting the amendments.

Sir George Young: I pay tribute to my hon. Friend the Member for Eastbourne (Mr. Waterson) who, throughout the passage of the Finance Bill, has tirelessly championed the cause of the shipping industry. I agree with what he said this afternoon, particularly on the strategic importance of the shipping industry.
I take very much on board what my right hon. Friend the Member for Worthing (Sir T. Higgins) said about the need to look at the discrimination and anti-competitive pressures that exist in other countries. I shall certainly ensure that my right hon. Friend the President of the Board of Trade and other Ministers read his speech and take appropriate action. Bobbing in the wake of my right hon. and hon. Friends are Opposition Members, and we are, of course, grateful for their support.
We have debated roll-over relief for shipping extensively in Committee, so my remarks can be brief. As my right hon. Friend the Member for Worthing said, the hon. Member for Durham, North-West (Ms Armstrong) spoke as much about the shipbuilding industry as the shipping industry. We provide financial support to the shipbuilding industry, under the shipbuilding intervention fund and the home shipbuilding credit guarantee scheme. But the measures before the House involve the shipping industry.
The point of roll-over relief is to encourage reinvestment in the merchant fleet in the face of competition from other countries, a number of which provide extensive tax subsidies to their shipping fleets. It is important, with a measure such as roll-over relief, to get the period right. The period must be long enough to ensure that the timing of the investment is not distorted or dominated by the mere ticking of a clock.
However, if the period is set too long, the measure goes beyond facilitating investment. By encouraging calculation about future price movements to dominate, it can cause commercially justified and economically desirable investment to be delayed. There is no magic


formula for the right period. It is a matter of judging the right balance in the particular circumstances of this unique industry.
In Committee, the eloquence of my hon. Friends convinced me that our original proposal for a three-year roll-over period is too short by a significant margin. It carries too great a chance that, in too many cases, investment would be forced by the expiry of the roll-over period and would be below par in economic terms, so the Government have concluded that a substantial increase in the period is needed, and a doubling of the roll-over period is warranted. The Government are therefore content to accept the amendments proposed by my hon. Friend the Member for Eastbourne, and we commend them to the House.
My right hon. and hon. Friends put down some markers. They threw some buoys overboard, which are bobbing in the water to be picked up or not by the Finance Bill Committee when it cruises past next year. We will, of course, monitor carefully the effect of the amendments.
I was asked about the cost. The cost of the measure as it now stands in the Bill peaks at £20 million in 1996–97, and starts to decline in 1998–99. The amendments mean that the peak costs would continue until 2001-02. I commend them to the House.

Amendment agreed to.

Amendment made: No. 3, in page 92, line 23, leave out 'three' and insert 'six'.—[Mr. Waterson]

Clause 88

SHIPS IN RESPECT OF WHICH CHARGE MAY BE DEFERRED

Amendments made: No. 4, in page 96, line 28, leave out 'three' and insert 'six'.

No. 5, in page 96, line 37, leave out 'three' and insert 'six'.

No. 6, in page 96, line 47, leave out 'three' and insert 'six'.—[Mr. Waterson.]

Clause 129

PART-TIME WORKERS: MISCELLANEOUS PROVISIONS

Sir George Young: I beg to move amendment No. 16, in page 143, line 30, leave out from 'words' to end of line 32 and insert
a full-time employee" there shall be substituted "an employee".'.

Madam Deputy Speaker: With this, it will be convenient to discuss also Government amendments Nos. 17 to 21.

Sir George Young: In Committee, when we debated new clause 5, on part-time workers in employee financial participation schemes, I said that we proposed to table amendments to the clause on Report. These are the amendments that I promised. As I said in Committee, they are designed to ensure that the provisions in the clause about the inclusion of part-time workers in financial participation schemes will apply only to part-time employees and not to part-time directors.
I explained in Committee why we had decided to amend the clause in this way. The clause is designed to open up financial participation schemes fully to part-time

workers following the House of Lords' decision in the case of Regina v. Secretary of State for Employment ex parte Equal Opportunities Commission and another.
When we were planning the legislation, we believed that, to treat part-time workers fairly and in accordance with the House of Lords' decision, it was necessary to treat all workers alike, whether they were employees or directors.
After further consideration, however, and in the light of representations from institutional shareholders, we were satisfied that we could properly take part-time directors out of the new clause altogether, without conflicting with the House of Lords' decision. We thought it right to do that, because there is a distinction between part-time directors and part-time employees. The personal interests of a company's non-executive directors, in particular, should not be too closely tied to the company and its share price if they are to bring a measure of independent judgment to the company's affairs.
The amendments mean there would be no change at all in the present treatment of part-time directors in relation to any of the tax-relieved schemes. In particular, they will remain unable to participate in approved executive option schemes and qualifying employee share ownership trusts.

Mr. Andrew Smith: The Financial Secretary has accepted our arguments in Committee, although at the time he was unable to accept the form of our amendment to achieve the objective that the Government are now achieving through amendment No. 16.
We welcome the amendment. It was always wrong to imagine that it would have been acceptable to extend the opportunities of the tax breaks on executive share options to part-time directors. I shall agree that the Government have conceded to the advice that they have received from institutional investors if the Financial Secretary will concede that they have also given ground to the upsurge in public concern on the matter and to the vigorous campaign waged by my right hon. and hon. Friends in the Labour party.
The amendment represents one small step towards reforming the potential abuse of the schemes that we have debated elsewhere in the Bill; therefore, we welcome it. It is wrong, however, that the Government should ever have entertained for an instant the idea of extending tax breaks on executive share options to part-time directors. We are glad that the Government have conceded to the pressure that the Labour party has mounted on the issue and we support the amendment.

Amendment agreed to.

Amendments made: No. 17, in page 143, line 35, leave out from beginning to end of line 41 and insert
'27(4) (qualifying employee defined as employee required to work at least 20 hours a week) the words from "who is required" to the end shall be omitted'.
No. 18, in page 143, line 44, leave out from 'words' to end of line 46 and insert
'a full-time employee" there shall be substituted "an employee".'.
No. 19, in page 144, line 1, leave out from 'week)' to end of line 3 and insert
'for the words "at that given time he worked as an employee or" there shall be substituted "in the case of a director, at that given time he worked as a".'.—[Sir George Young.]

Clause 146

INHERITANCE TAX: AGRICULTURAL PROPERTY

Amendments made: No. 84, in page 156, line 16, at end insert—
'(1A) After subsection (2) of that section there shall be inserted the following subsection—
(2A) In the application of this section as respects property in Scotland, the reference in subsection (2)(c) above to a tenancy beginning on or after 1st September 1995 includes a reference to its being acquired on or after that date by right of succession (the date of acquisition being taken to be the date on which the successor gives relevant notice under section 12 of the Agricultural Holdings (Scotland) Act 1991).".'.
No. 85, in page 156, line 17, leave out 'Subsection (1)' and insert 'Subsections (1) and (lA)'—[Mr. Nelson.]

Schedule 3

AMUSEMENT MACHINE LICENCE DUTY

The Paymaster General (Mr. David Heathcoat-Amory): I beg to move amendment No. 80, in page 164, line 24, leave out from 'machines); to end of line 26 and insert
'for paragraph (b) there shall be substituted the following paragraphs—
(b) a five-penny machine which is a prize machine without being a gaming machine or which (if it is a gaming machine) is a small-prize machine, or
(c) a thirty-five-penny machine which is not a prize machine."'.

Madam Deputy Speaker: With this, it will be convenient to discuss also the following: Government amendments Nos. 23 to 26.
Amendment No. 90, in page 166, line 21, at end insert
'after paragraph (a)—(d) there shall be inserted—
(e) the machine is one that can only be played by the insertion into the machine of a coin or coins of a value exceeding 50 pence.".'.
Government amendments Nos. 27 to 32, 81 and 34.

Mr. Heathcoat-Amory: My right hon. and learned Friend the Chancellor announced, in his Budget speech, that he wanted to widen the coverage of gaming duty to cover amusement machines such as arcade video games. That is the purpose of clause 13 and schedule 3. The schedule is due to come into effect on 1 November 1995 for machines made available for play on or after that date.
Gaming machines have long been liable to duty, but the tax base for gaming machine licence duty was being eroded by competition from machines outside the scope of the existing duty. The amendments fulfil a pledge given in Committee that the Government would make changes to the provisions for the introduction of amusement machine licence duty.
The package is designed to meet the industry's concerns that the extension of the duty net captured too many machines that could not afford to bear the licence cost, even at the rate of £250 a year.
We listened carefully to the industry and we are grateful for the help it gave in framing the amendment in terms that it finds more acceptable. I am also grateful to my hon. Friends, particularly the hon. Members for Blackpool, South (Mr. Hawkins), who is in his place, and for Dover (Mr. Shaw), who were vigilant to ensure that the concerns of the industry were brought to my attention.
We have already introduced amendments in Committee to give effect to the seasonal concession for all machines, including those newly brought within the scope of the tax.
The amendments, first, limit to the lowest rate—£250—all machines newly brought within the scope of the tax. That meets a concern of the industry that some of the new machines would otherwise be taxed at the higher gaming machine rates. The £250 rate for the new machines is less than half the rate that applies to the lowest category of gaming machines.
Secondly, the amendments define video machines according to the number of screens rather than to the number of playing positions, and this again meets a concern of the industry that a machine with two playing positions for one screen could be taxed at twice the normal rate. That will not be the case.
Thirdly, the amendments exempt from duty all new machines except quiz machines that can be played for an amount not exceeding 35p. That goes further than the 20p exception mentioned in Standing Committee. For instance, it means that machines that give three plays for £1 will be exempt. That will exclude many pinball machines.
Fourthly, we will limit the duty to video machines, quiz machines and pinball machines. That responds to a concern that, if we were to extend it wider than that, many arcades, particularly those in seaside resorts, could not afford to keep in play a number of machines which appeal to children. Therefore, a typical family entertainment centre would become a centre almost exclusively for adults.
Fifthly, the trade has requested the reintroduction of special licences, and I am willing to concede that. The envisaged reintroduced special licences would enable operators to move machines more freely between sites without incurring additional licensing costs. That is particularly important for machines that are marginal and that could be given a boost by transferring them from one site, such as a pub, to another site in order to cater for changes in demand.
That is a complex measure. We will need to discuss it with the trade and give it legislative effect in the next Budget. Meanwhile, I assure the House that the facility will be available from the introduction of the new duty on 1 November 1995 by extra-statutory concession. I think that the House will agree that we have gone a very long way towards meeting the industry's concerns and I commend all the amendments to the House.

Ms Dawn Primarolo: Although I welcome the Government's amendments and their about-face on the issue, it is a shame that the Paymaster General did not have the good grace to acknowledge the hard work and the lobbying by hon. Members on both sides of the House in relation to it or the debate about it in Committee.
The Government proposed to introduce a new tax on amusement machines which hon. Members on both sides of the House lobbied against extensively. The trade association, which represents some 80 per cent. of the amusement machine industry, worked hard to educate the Government as to the folly of their original proposals. It pointed out that, in their rush to find more and more indirect taxes in order to try to fulfil their hollow promise of direct tax cuts, the Government would be taxing an industry to such an extent that City accountants Pannell,


Kerr and Forster estimated that almost 3,000 jobs would be lost as a result of the original proposals and that they would cost the Government almost £50 million.
The proposals for a new tax on machines came on top of a 43 per cent. increase on gaming machine licence duty in the past two years. There is a good lesson for the Government to learn from this sorry episode: it is always better to consult and to listen to the industry before drafting legislation.
The Government have now made some very real concessions in the regime as proposed originally, such as exempting from duty videos and pinball machines costing 35p or less to play, and reintroducing the special licences that the Government originally proposed to abolish. That is a triumph not only for the industry but for the good sense that has prevailed among the Opposition, if not on the Government Benches. We are glad that progress has been made.
Nevertheless, the Government will have to monitor closely the impact of the new tax regime on the industry. I hope that they will give a commitment in stronger terms than the Paymaster General used to consult widely with the industry. There is no point in taxing an industry until it goes out of business, and the Government came very close to achieving that in this instance. We welcome the amendments, but I am sure that we will have to return to the issue again in later Finance Bills.

Sir Jerry Wiggin: Before I proceed, I should declare an interest as I am an adviser to the British Holiday and Home Parks Association, a number of whose members have amusement machines installed on their sites.
I rarely agree with the hon. Member for Bristol, South (Ms Primarolo), but on this occasion I believe that she made an extremely valid point about new taxes. Time after time, without ever learning the lessons from previous occasions, the Government introduce a new tax without consultation, without thought and frequently without any depth of knowledge of the industry concerned. It is then swiftly revealed that the effects of the tax are counter-productive and may lead to unemployment. In this case, far from raising revenue, it would have cost the Government money if certain alterations had not been made.
I commend to my hon. Friend the Paymaster General a study of the system which I understand prevails in America. A select committee of Congress, or its equivalent, anticipates a tax proposal not in quantum, but in its application, target and how it will be carried out for at least a year before it is introduced. That gives everyone who has an interest or expertise in the area the opportunity to set the matter straight. Therefore, when it is finally introduced, the legislation is clear, easily understood and has a beneficial effect.

Sir John Gorst: Like my hon. Friend, I must declare an interest as I am an adviser to the industry. I remind him that when amusement licence duty was first introduced 26 years ago or more—by a Labour Government—the same thing happened. Roy Jenkins introduced it at a swingeingly high level which had to be slashed to meet the industry's ability to pay. As my hon. Friend says, it happens time and again under Government

after Government. I hope that he is correct in urging the Government to consult any industry before taxing it in future.

Sir Jerry Wiggin: I am grateful to my hon. Friend for reinforcing my point. I do not refer just to this tax; it is a wide point which I hope that the Government wil! take seriously.
There is some evidence of a welcome change and of new thinking within the Treasury. Perhaps my hon. Friend the Paymaster General will go down in history as one who made a mark on our legislative procedures by introducing a different way of tackling the taxation issue. I thank him for taking immensely seriously the representations from many of my constituents in Weston-super-Mare. I know that amusement arcade operators in Burnham-on-Sea in his constituency expressed the same opinions. In responding to them, I believe that we have arrived at a much better arrangement. The fact that the British Amusement Catering and Trades Association has accepted the changes is, I think, adequate confirmation that the present proposal is much more sound.
I am sorry that, because of the shenanigans of the Whips and the misfortune of having an early night, the motion on new clause 18, which would have allowed us to debate the matter, was not moved yesterday. The new clause proposed the exemption of caravan and mobile home parks from the tax on the ground that the sorts of entertainment machines provided on site to amuse the inhabitants of such parks during the British summer were not main revenue earners, but simply amusements to occupy people. The machines will have to be removed because the revenue from them is so small that it is not worth paying the tax.
All caravan and mobile home parks have to be registered with and licensed by the local authority; therefore, there was no difficulty in definition. The Government clearly were not going to smile on the new clause, but I hope that they will, however, do their sums, as the Customs and Excise goes about its duties, and work out that the cost of collecting from and checking those many remote sites will prove a negative operation. The revenue for the whole tax is minuscule. Indeed, I would question whether the total addition to the revenue has been worth the anguish that it has caused to a good many people.
I know that time presses, but I hope that it will be in order if I thank my hon. Friend the Paymaster General once again for the amendments, which will be strongly supported in seaside towns and in the amusement areas of many of our tourist attractions. Ministers quite rightly on the one hand make a point about the importance of tourism, but then the dead hand of the Treasury manages to intervene and tax it. The two are not compatible. My hon. Friend has been going down the right course with the amendments.

Mrs. Margaret Ewing: Although I welcome amendment No. 80, I shall address myself to amendment No. 90, which stands in my name and that of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd).
Like other right hon. and hon. Members, I have received extensive briefings from BACTA on this issue, so I do not intend to rehearse the arguments that have already been propounded by the hon. Member for Bristol, South (Ms Primarolo), from the Labour Front Bench. It is worth reminding the House, however, that BACTA


contributed some £375 million to the Exchequer in 1994 in VAT and gaming machine licence duty. It is, therefore, an organisation that cannot be ignored. All of us have welcomed the way in which it has conducted its campaign in the context of the Finance Bill.
I have also received considerable representations from representatives of the licensed trade association in my constituency, which, of course, is also an area where tourism is of great significance. Whatever one's moral opinion of the various machines that operate in our tourist resorts, one must recognise that they play a significant part in ensuring employment and opportunities for people who wish to reside permanently in those areas.
Amendment No. 90 was tabled by my hon. Friends to establish the effects of the Government's amendments. Although BACTA is pleased with the changes which give some genuine relief to the industry, we must recognise that it is a new tax and that it was accompanied by a second substantial increase in gaming machine licence duty in two years, neither of which can be passed on. I put it to Ministers on the Treasury Bench that there should be a requirement to look at the possibility of having a 50p exemption, as I think that it follows Government thinking on the issue. A 50p exemption would give genuine relief to the low-earning machines that would otherwise be removed from site. We have to think of the small tourist areas—the villages, caravan sites, and small localities—where the machines are one of the attractions for people who come to the area. I also believe that a 50p exemption would catch some of the higher-earning machines and reduce amusement machine licence duty takes to an insignificant level. That is a matter that must be taken on board. I wonder why the Government have not considered extending the exemption that currently exists to skill with prizes machines, because there does not seem to be a particular difficulty in that. I do not know why they have drawn the line between the various machines that might be played.
I also ask the Paymaster General to make it clear to us whether he has worked out how many machines are currently on a 20p or 50p payment system, because there does not appear to have been a real Government assessment of that issue. We need to know the implications for tax take and assessment. Surely we have the right to know precisely what the Government are talking about.
The Paymaster General referred earlier to the fact that he would continue consultations with BACTA and other interested organisations, which, I assume, will include representatives of the tourism industry. Once he has completed those consultations, how does he intend to bring back his recommendations to the House? Will it be through statutory instrument, or does he intend to introduce further primary legislation? Is it something that we can anticipate in the Budget in November this year? It is extremely important to know the answer, because the people who have written to hon. Members, on both sides of the House, want to know how the matter will be progressed. I should be most grateful if the Paymaster General would announce what procedures he intends to follow.

Mr. Nick Hawkins: I wish to add briefly to the comments that have already been made and to add to them my thanks and those of my other hon.
Friends who have been heavily involved in discussions with my hon. Friend the Paymaster General. I thank my hon. Friend and his colleagues on the Treasury Bench for their great courtesy and for the time and trouble that they have taken in welcoming the delegations and the various submissions that have been made.
I pay particular tribute to the leadership in the campaign and to my hon. Friend the Member for Hendon, North (Sir J. Gorst), who is in his place, and who has always fought the industry's cause strongly. Representing as I do the southern half of the world's leading tourist resort, it is no surprise that I pay tribute to him and to other hon. Friends, including my hon. Friends the Members for Weston-super-Mare (Sir J. Wiggin), for Hastings and Rye (Mrs. Lait)—who was extremely assiduous in supporting all the work that we did—and for Dover (Mr. Shaw), whom my hon. Friend the Paymaster General mentioned in his opening remarks.
Both BACTA and BALPPA—the British Association of Leisure Parks, Piers and Attractions—have been extremely active in making their case, supported by many smaller companies, even those which are not members of those leading organisations, and by individual employees. The size of my file on the matter well exceeds that on any other issue that I have had to take up in my three years in the House. It has been an extremely effective campaign, and I very much welcome the fact that the Government have listened. Before the hon. Member for Bristol, South (Ms Primarolo) is too confident in claiming credit for the Opposition, I should remind her that the day before the matter came before the Committee, of which she and I were members, she was asked by BACTA—the main lobbying organisation—not to press the Labour amendments to a vote. She told BACTA that she would not, but Opposition Members thought that they saw a short-term electoral opportunity—

Ms Primarolo: Will the hon. Gentleman give way?

Mr. Hawkins: When I finish my point, of course I shall give way to the hon. Lady.
Having promised the lobbying organisation that the Labour party would not press the matter to a vote, the hon. Lady thought that she saw a voting opportunity to defeat the Government and broke her promise.

Ms Primarolo: The hon. Gentleman has misled the House, and I shall produce the evidence for him in private. I hope that he will then come back to the House to correct the record. What he has said is not true.

Mr. Hawkins: I am happy to welcome any submissions that the hon. Lady may make to me, but I should tell her that what I just said, and I hope that I was not misleading the House, came to me directly within five minutes of it happening from those—

Madam Deputy Speaker: Order. I am concerned tonight only with the substance of the amendments before us. I do not want to hear a potted history of what did or did not happen.

Mr. Hawkins: I am grateful, Madam Deputy Speaker. Let me end by thanking my hon. Friend the Paymaster General once again for his common sense and courtesy.

Mr. Brian Wilson: At one point during Conservative Members' speeches, I thought that we were attending a consultants' convention. I have no interest to declare, other than a constituency interest.
I, too, welcome the amendment. I was lobbied by arcade operators in my constituency, particularly Mr. Billy Cullis, who has arcades in Saltcoats, Largs and elsewhere in south-west Scotland. It is a pity that BACTA was required to line Rodin's with pinball machines to bring home a point that should have been obvious from the start. As has been pointed out by hon. Members on both sides of the House—particulary my hon. Friend the Member for Bristol, South (Ms Primarolo)—if there had been some consultation and cost-benefit analysis before the introduction of the original proposal, it would never have reached the stage that it reached.
7 pm
The proposal would have caused a loss of jobs in the industry, which would have increased the net burden on the state. It would also have led to the removal of machines that give innocent non-gambling pleasure to children in particular, softening the impact of arcades. If those machines had been taken away, we should have been left with rows of one-armed bandits—which would have been rather an odd aim even for a Government who are currently devoted to the promotion of gambling.
We welcome the changes that have been made, and I am glad that my constituents' interests have been safeguarded by my hon. Friend the Member for Bristol, South and other Opposition Members. The attempt by the hon. Member for Blackpool, South (Mr. Hawkins) to make a petty party point was pretty pathetic; let us not forget that we would not be discussing the proposal at all had it not been originally made by the Government of which he is a temporary supporter.

Mr. Elfyn Llwyd: I support what has been said by the hon. Members for Cunninghame, North (Mr. Wilson) and for Moray (Mrs. Ewing). I was pleased to add my name to amendment No. 90.
The Government have gone some way towards meeting our demands, and I am grateful for that. The industry is very important to my constituency: in Barmouth, for instance, I have been lobbied persistently. I agree with the hon. Member for Cunninghame, North: without the good sense of those who lobbied, the changes would not have been made. The Government should have considered the matter in more depth before drafting their original proposals.
The hon. Member for Weston-super-Mare (Sir J. Wiggin) spoke of the anxiety caused to the industry by those initial proposals. They were draconian, and would have led to many job losses. I therefore give the Government amendment a guarded welcome, although I should have preferred amendment No. 90 to have been accepted. I hope that the Government will not make an even worse mess of things in the next Finance Bill. My speech may sound grudging, but I am nevertheless grateful for small mercies.

Mr. Peter Griffiths: Let me join other hon. Members on both sides of the House in thanking my hon. Friend the Paymaster General for his flexible approach. I recall the first occasion on which Conservative Members visited him to discuss the matter: he was amazed to find his office filled to overflowing with Members of Parliament who had come to represent the views of operators of amusement arcade machines in holiday constituencies and elsewhere.
Following the amendments, the Government's proposals are much more flexible. The hon. Member for Cunninghame, North (Mr. Wilson) has already pointed out that we have now extended the gap between machines intended purely for amusement and pleasure and those based on an element of gambling and gaming. The difficulties probably arose because the two types of machine were muddled when the original proposals were made.
I thank my hon. Friend the Paymaster General for what he has done, but we should also pay tribute to the way in which the industry has lobbied us. Many hon. Members have referred to that, and have also named specific individuals. Like those in traditional fairs, many operators of amusement arcades are marvellous characters, and it is a pleasure to be lobbied by them. That is not always the case when the House is heavily lobbied. We all enjoyed our contacts with representatives of the amusement business, and with those who operate the small machines.
I am particularly grateful for the exclusion of such machines as the traditional crane, which I used to play many years ago when I was a child. It really represents the spirit of the seaside, and, given the weather in this country, parents welcome it.
My hon. Friend the Paymaster General can take considerable credit for the way in which the matter has been handled. I think that the industry feels a certain satisfaction with Parliament's response to its genuine concerns.

Mr. Heathcoat-Amory: I am grateful for the general acceptance that the extension of the tax has had a happy outcome. I am particularly grateful for what was said by my hon. Friends the Members for Portsmouth, North (Mr. Griffiths) and for Blackpool, South (Mr. Hawkins), who were closely involved in the discussions that took place.
Let me tell my hon. Friend the Member for Portsmouth, North that I never intended to damage the industry, or drive out of business people who add to the richness and gaiety of our national life. We have all experienced the valuable family entertainment that is provided in our constituencies. There are also expensive machines that cater for the more adult player: those are not gaming machines, but they cost a good deal nevertheless. We intended to shift the burden to broader shoulders as far as possible, and to make things easier for seaside arcades and operators who may have only a few machines.
I understand the point made by my hon. Friend the Member for Weston-super-Mare (Sir J. Wiggin) about seasonal caravan parks, which often have only a few machines. It would be sad if those operators felt that they could not continue. I think that my hon. Friend will agree, however, that the seasonal licence greatly assists caravan park owners, who can obtain a six-month licence for the summer months and operate the machines for eight months: effectively, they are given two months free of charge. The exemption for any machine costing less than 35p a play automatically excludes many smaller machines catering for holidaymakers.
The hon. Member for Bristol, South (Ms Primarolo) issued a number of strictures about the need to consult. I take it from what she said that Labour, if it ever gained power, would always consult on any tax changes. Perhaps our successors, who may one day witness that phenomenon, will remember the pledge.
The hon. Member for Moray (Mrs. Ewing) asked me about skill with prizes machines, sometimes called quiz machines. Why were they included? The answer is that they can give the player up to £10 in prizes. I remind the hon. Lady that they will be taxed at only £250 a year, whereas comparable gaming machines that can give out prizes and cash amounting to only up to £6 are already taxed at £535 per annum. I think that she will agree that it is fair to include the quiz machines in the tax.
The hon. Lady asked me about the legislative vehicles for those changes. I confirm to her that all the changes are in the Bill, with the exception of the special licences that we shall introduce. Because of their complexity, they cannot be drafted in time for the Bill. They will be in the next Finance Bill. I make it clear that an extra-statutory concession will ensure that the benefits, or their equivalent, will be available from 1 November until the date when the next Finance Bill comes into law. I hope that hon. Members on both sides of the House will agree that the tax is right and proper and that the House will give the amendments its consent.

Amendment agreed to.

Amendments made: No. 23, in page 164, line 30, leave out from beginning to end of line 42.

No. 24, in page 165, leave out lines 14 to 18 and insert—

(1)
(2)
(3)
(4)


'Period (in months) for which licence granted
Machines that are not gaming machines
Gaming machines that are small-prize machines or are five-penny machines without being small-prize machines
Other machines'

No. 25, in page 166, line 15, leave out 'and'.
No. 26, in page 166, line 21, at end insert 'and
(e) the machine is a gaming machine, a video machine or a pinball machine.'.
No. 27, in page 166, line 22, leave out 'An amusement machine' and insert
'A machine constructed or adapted for the playing of a game'.
No. 28, in page 166, leave out lines 35 to 44 and insert—
'(1B) A machine constructed or adapted for the playing of a game is a video machine for the purposes of this Act if—

(a) a micro-processor is used to control some or all of the machine's functions; and
(b) the playing of the game involves information or images being communicated or displayed to the player or players by means of any description of screen, other than one consisting only in a blank surface onto which light is projected.

(1C) For the purposes of this Act an amusement machine is a prize machine unless it is constructed or adapted so that a person playing it once and successfully either receives nothing or receives only—

(a) an opportunity, afforded by the automatic action of the machine, to play again (once or more often) without paying, or
(b) a prize, determined by the automatic action of the machine and consisting in either—

(i) money of an amount not exceeding the sum payable to play the machine once, or

(ii) a token which is, or two or more tokens which in the aggregate are, exchangeable for money of an amount not exceeding that sum.".'.

No. 29, in page 166, line 46, leave out
'for "a gaming" there shall be substituted "an amusement"'
and insert
'for "a gaming machine" there shall be substituted "a machine of any description".'.
No. 30, in page 166, line 47, leave out from beginning to end of line 7 on page 167 and insert—
'(3) For subsections (5) to (9) of that section there shall be substituted the following subsections—
(5) For the purposes of sections 21 to 24 above a machine (the actual machine) in relation to which the number determined in accordance with subsection (5A) below is more than one shall be treated (instead of as one machine) as if it were a number of machines (accountable machines) equal to the number so determined.
(5A) That number is—

(a) except where paragraph (b) below applies, the number of individual playing positions provided on the machine for persons to play simultaneously (whether or not while participating in the same game); and
(b) where—

(i) that machine is a video machine but not a gaming machine, and
(ii) the number of such playing positions is more than the number of different screens used for the communication or display of information or images to any person or persons playing a game by means of the machine,

the number of such screens.

(6) Subsection (5) above does not apply in the case of any machine which is an excepted machine for the purposes of section 21 above or in the case of a pinball machine.
(7) Any question whether the accountable machines are, or are not, machines falling within any of the following descriptions, that is to say—

(a) gaming machines,
(b) prize machines,
(c) small-prize machines, or
(d) five-penny machines,

shall be determined according to whether or not the actual machine is a machine of that description, with the accountable machines being taken to be machines of the same description as the actual machine.".'.
No. 31, in page 167, line 7, at end insert—
'. After section 25 there shall be inserted the following section—
"Power to modify definition of 'amusement machine'
25A.—(1) The Treasury may by order modify the provisions of section 25 above—

(a) by adding to the machines for the time being specified in subsection (1)(e) of that section any description of machines which it appears to them, having regard to the use to which the machines are put, to be appropriate for the protection of the revenue so to add to those machines; or
(b) by deleting any description of machines for the time being so specified.

(2) An order under this section may make such incidental, consequential or transitional provision as the Treasury think fit, including provision modifying section 21 or section 25(5A) above for the purpose of—

(a) specifying the circumstances (if any) in which a machine added to section 25(1)(e) above is to be an excepted machine for the purposes of section 21 above; or
(b) determining the number which, in the case of a machine so added, is to be taken into account for the purposes of section 25(5) above.".'.



No. 32, in page 167, line 9, after '7' insert '01'.
No. 81, in page 167, line 16, at end insert—
'(2) In subsection (2) of that section—

(a) after the definition of "United Kingdom" there shall be inserted the following definitions—

'video machine' has the meaning given by section 25(1B) above;
'prize machine' has the meaning given by section 25(1C) above;
and
(b) after the definition of a "five-penny machine" there shall be inserted the following definition—
'thirty-five-penny machine' means an amusement machine which can only be played by the insertion into the machine of coins of an aggregate denomination not exceeding 35p;".
(3) After subsection (2) of that section there shall be inserted the following subsection—
(2A) References in sections 21 to 25 above and in this section and Schedule 4 to this Act to a game, in relation to any machine, include references to a game in the nature of a quiz or puzzle and to a game which is played solely by way of a pastime or against the machine, as well as one played wholly or partly against one or more contemporaneous or previous players.".'.
No. 34, in page 167, line 19, at end insert—
' In section 32(3) (orders subject to affirmative procedure), for "or 14(3)" there shall be substituted "14(3) or 25A",'.—[Mr. Wells.]

Schedule 4

VEHICLE EXCISE AND REGISTRATION

Amendment made: No. 69, in page 170, line 6, at end insert—
'Exemption for vehicles used between different parts of land
3A. In Schedule 2 to the 1994 Act the following shall be inserted after paragraph 20—
"Vehicles used between different parts of land
20A. A vehicle is an exempt vehicle if—

(a) it is used only for purposes relating to agriculture, horticulture or forestry,
(b) it is used on public roads only in passing between different areas of land occupied by the same person, and
(c) the distance it travels on public roads in passing between any two such areas does not exceed 1.5 kilometres.".'.—[Mr. Heathcoat-Amory.]

Mr. Heathcoat-Amory: I beg to move amendment No. 61, in page 176, leave out lines 45 to 49 and insert—
'"(2) The annual rate of vehicle excise duty applicable—

(a) to any rigid goods vehicle which is a showman's goods vehicle with a revenue weight exceeding 3,500 kilograms but not exceeding 44,000 kilograms, and
(b) to any rigid goods vehicle which is an island goods vehicle with a revenue weight exceeding 3,500 kilograms,

shall be the basic goods vehicle rate.'.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): With this, it will be convenient to discuss also Government amendments Nos. 62 to 67.

Mr. Heathcoat-Amory: May I remind hon. Members of the background to this debate? At an earlier stage in the consideration of the Bill, I made it clear that the concession attaching to vehicle excise duty of island vehicles arose from the fact that no plating and testing

stations existed on a number of offshore islands. Consequently, vehicles on those islands are relieved of the obligation to pay duty higher than £150 per year.
A change has been made in the Bill. The present system of plating and testing is being replaced by another system: revenue weight taxation. If we did nothing, therefore, all those vehicles would be subject to the full vehicle excise duty rates.
In an earlier debate, I undertook to return to the House with proposals to make some concessions in recognition of the fact that many of those vehicles are low-mileage vehicles and are essential to the well-being of the island communities in which they are based. I therefore met and corresponded with hon. Members representing those islands. I have agreed to continue to grant significant special treatment to lorries on those small islands.
The Government have decided to allow the £150 concessionary rate of vehicle excise duty to continue to apply to smaller lorries—that is, lorries up to 17 tonnes—provided that they are based on the islands, irrespective of the mainland mileage that they may also do. Heavier lorries—defined as being over 17 tonnes—that are based on the islands, but that visit the mainland only to collect or deliver goods from docks, will also be liable for the £150 per annum concessionary rate. The definition of "delivering to docks" will include loading or unloading within 5 km of those docks.

Mr. Wilson: We have moved a fair distance since we had what became a famous little late-night debate on an amendment tabled by the hon. Member for Argyll and Bute (Mrs. Michie). To some extent, the Minister has educated himself in the ways of offshore islands. He knows of the existence of many islands that he might not have been terribly familiar with that night. He was not served very well by his briefing on that occasion.
Certainly, the proposal before the House is a distinct improvement, although the Minister has not gone as far as we would like him to have gone. That is evidenced by the figures that he supplied us with on the number of vehicles in various categories that will be exempt. In Arran, the main island in my constituency, there are 10 vehicles of 7.5 tonnes and 12 of 17 tonnes. Twenty-two vehicles will be exempt from normal excise duty.
However, there are nine 24-tonne vehicles, six 30-tonne vehicles and 13 38-tonne vehicles—28 in all. Those larger vehicles will for the first time be subject to the same vehicle excise duty level as vehicles based on the mainland. That will be a source of great disappointment to my constituents who operate the firms. They will face an on-cost running into many thousands of pounds, which will inevitably be passed on to islanders. I am sure that that will be the view of my colleagues who participated in the first debate and who will participate again this evening.
The Minister's reason for denying that concession was that it was not practical to work out with the ferry operators a scheme that would have identified the number of journeys that those larger vehicles made per year. He said that it was simply not feasible to give that concession.
I should like to record my disappointment about that. It would have been feasible to establish that those lorries were genuinely island-based and serving island communities. Therefore, the principle that the Minister


has accepted in relation to smaller vehicles should have been applied to larger vehicles. We have, however, moved some part of way. For that much, I am grateful.
I want to put the matter in perspective. The islands have not been given a great concession. If the Government want to hand out money through the taxation system, they are perfectly capable of doing so. I do not need to remind the Minister that on 1 April—just a few days ago—a spectacular reduction in taxation took effect which involves the communities that we are talking about.
I refer to the abolition of sporting rates, which will give a minimum of £2 million—or, according to the boast of one Tory Member of Parliament, £5 million—to sporting proprietors, mainly in the highlands and islands of Scotland. I guess that, in his other capacity, the Minister has probably personally gained more from that tax cut than any island haulier will gain from the small concession that has been made tonight.

Mr. Robert Key: I thank my hon. Friend the Minister. The debate that we had late at night on another occasion was one of the most embarrassing experiences that I have had since I was elected to the House. I am grateful for the statesmanlike and practical way in which he has resolved the problem, which will be of enormous benefit to many islanders the length and breadth of the United Kingdom.

Mrs. Ray Michie: I am grateful to the Paymaster General for having agreed to reconsider the matter of a concessionary vehicle excise duty rate for island-based lorries. It had come as something of a shock to me and the island communities in my constituencies and those of other hon. Members that, after reassurances from the Department of Transport last year, we suddenly found that the Bill contained clauses that put an end to such concessions.
My impression on the night that we debated the matter at the end of January was that the Minister had had no consultation with the Department of Transport and was somewhat taken aback by—indeed, unprepared for—the strength of feeling expressed. I therefore appreciate the Minister's rethink and the useful meeting and subsequent exchange of letters which I and other hon. Members have had with him.
We now have a definition of an island goods vehicle which, as the Minister said, can be of any size if used only on the islands, or on mainland roads to and from the islands provided that it weighs less than 17 tonnes. I am glad that he agreed to my request to increase the size from 12 tonnes to 17 tonnes. That will be especially welcome to a number of farmers and crofters, because it will allow them, for example, to take cattle or sheep to market and to return with a load of hay from wherever they can get it on the mainland.
The definition of a small island—less than 230,000 hectares—caused a moment of panic, because I thought that the island of Mull must be bigger than that—but not so. The Minister kindly sent a list of islands that come into this category, and asked for any additions. I can tell him that we need to include the islands of Luing and Lismore. He must have been horrified when he saw the number produced by Ordnance Survey, but I can assure him that they do not all have lorries, at least not yet.
Amendment No. 61, subsection (2)(b), would allow the lorries coming off the ferries to travel 5 km without penalty to marshalling yards. That would cover the tractor units that simply ply back and forth on the ferries, which we discussed previously. It is welcomed by my hon. Friend the Member for Orkney and Shetland (Mr. Wallace) because often, on the islands in his constituency, lorry loading and unloading cannot be carried out on the pier but has to happen at a nearby depot or yard.
There is, however, one problem that I should like to draw to the Minister's attention. A lorry larger than 17 tonnes and operating solely on an island may need to come off once in a while for special repairs. For example, I have a constituent on the island of Islay who has a Volvo lorry which can be repaired only at Barrhead near Glasgow. I hope that the Minister's officials will try to solve such problems.
I cannot sit down without making it clear to the House that island-based haulage contractors are deeply concerned by the loss of the concession for those who operate businesses on the islands. I am sure that many companies have written to Ministers. Such companies include Gordon Harper, the haulage contractor on Mull; the Trading and Transport company on Tiree; Rothesay Carriers on Bute; and G. and M. Porter, hauliers on Islay. They all provide much-needed employment which is vital for the prevention of further depopulation and for the protection of the fragile economies of those areas.
The Minister will be aware of the views expressed by the Freight Transport Association, to the effect that it is illogical not also to allow larger lorries the same concession when they are going to the mainland only to deliver goods from, or collect goods for delivery to, the islands. They are not in competition with mainland operators, who are not interested in this sort of work because they do not wish to bear the extra ferry costs.
As I am sure the Minister knows, the cost of living on many islands is very high. For example, on Tiree, petrol is £3 a gallon. There are only three ferries a week in winter, and the return ferry cost for a 32-tonne articulated lorry carrying 20 tonnes, made up of groceries, beer and household goods, or a load of coal, is £416 plus value added tax.
On the island of Mull, the haulage contractor's business depends on the taking of loads to and from the mainland. He also transports timber and granite and returns with animal foodstuffs, fish food for the fish farms, building materials or coal. He does not compete with mainland operators, and is fearful that any increase in the cost of the produce coming from the island will lead to mainland buyers saying that it is too expensive and that they will no longer buy such commodities.
Of course, the islands have recently suffered another blow. The Secretary of State for Scotland announced that the Government were withdrawing the tariff rebate subsidy given to the boats and ships which succeeded the puffers which plied the islands carrying salt and coal. The subsidy is to be withdrawn, so more goods will be hauled on the roads.
I should like to point out that, in terms of Treasury take, the amount that we are debating is peanuts and of no consequence in the larger scheme of things, yet, on the islands, it is the difference between surviving and going out of business, between staying on the islands and


leaving. I am not exaggerating when I say that I have absolutely no doubt that some island haulage contractors will have to close.
Although there was some abuse, which was deeply resented by islanders who carry on a legitimate and honest business, it was not widespread. I suggested to the Minister how enforcement could be properly policed. Caledonian MacBrayne in fact records the registration numbers of lorries, and lorries carry a tachograph which record where lorries leave from, where they are going and the distance they travel. I hope, therefore, that the Minister will hold further discussions, especially with the Freight Transport Association, because the problem will not go away.
Finally, I am sincerely grateful to the Paymaster General for having listened, and I appreciate the support that I have received from hon. Members from all parties. From nothing, sensible discussion has yielded a significant change of heart, and I ask the House to support the amendment.

Sir Patrick Cormack: Gratitude is a very rare commodity in politics, and it is a pleasure to be able to tell my hon. Friend the Paymaster General that I am extremely grateful to him. The debate that took place on that January night was embarrassing. I felt deeply sorry for him, because he was taken unawares in a gale that would have done credit to any island. He has, however, emerged from it a stronger and tougher man, and has listened carefully. I shall not make any churlish comments at all, but wish simply to express my gratitude to him for taking on board a very important case that was made with great eloquence by hon. Members of all parties.
I am delighted that my hon. Friend the Member for Salisbury (Mr. Key) is present—he was Banquo at the feast in the previous debate—and that he has been able to utter on this occasion. The solution that has been reached, while not perfect, will bring enormous benefit to some of the finest citizens in the British Isles.

Mr. Calum Macdonald: I congratulate the hon. Member for Argyll and Bute (Mrs. Michie) on moving the amendment which caused the initial debate some weeks ago, and on pursuing the case so tenaciously since. I also thank those Conservative Members who supported Opposition Members when this case was raised, especially the hon. Member for Salisbury (Mr. Key). Without his initial flexible attitude while he was a Minister, we would not have had the opportunity to return to the matter again. The Paymaster General must also be thanked for having agreed to reconsider this issue after what must have been quite a painful night for him.
I am afraid, however, that thanks have to be limited, because it is not a question of benefits being conferred on the islands, but of damage being limited on them. The concession made by the Minister is still much too limited from my point of view and that of my constituents. It will cover only less than half the lorries which were previously exempt. As the hon. Member for Argyll and Bute said, there is no reason in principle why the concession could not have been extended to the whole range of lorries which were previously exempt.
It is also important to note that the initial defence mounted by the Minister on behalf of the Treasury was that taxation had to be absolutely uniform in all circumstances throughout the United Kingdom. It is welcome that the Treasury has been forced to acknowledge that that principle cannot be applied inflexibly or stupidly, and that, indeed, there are profound differences between different parts of the United Kingdom. The position of the islands is very special, and we must take account of it.
It is also important to note that this damage limitation exercise on behalf of island hauliers takes place against a background in which the Government are imposing swingeing cuts in other forms of support for transport and communications to the islands. The abolition of the freight subsidy, which will involve losses of million of pounds to island communities, has already been mentioned. As has been pointed out, the abolition of that subsidy will force more haulage on to the roads and away from direct travel by ship. Hauliers will then, of course, incur the additional costs of carrying freight in lorries which now pay an additional tax.
There is also a continued squeeze on Caledonian MacBrayne and the support that it receives from the Scottish Office. All in all, the picture is very much of island communities continuing to be hit by a combination of measures introduced by the Government in reducing subsidy and imposing new levies and taxes where there was none before.
It has to be emphasised that communication is a vital lifeline to fragile and vulnerable island communities. I do not think that we as representatives of those communities can be satisfied completely with the concession from the Government, and I have no doubt that we shall return to the question in future.

Mr. Heathcoat-Amory: I am grateful for the remarks made by my hon. Friends the Members for Salisbury (Mr. Key) and for Staffordshire, South (Sir P. Cormack). We have indeed tried to meet the legitimate needs and concerns of the smaller islands. We are supposed to be an island race, but I had never realised how many islands there were with small numbers of roads on them. The hon. Member for Argyll and Bute (Mrs. Michie) has just listed a couple more, which we shall undoubtedly add by secondary legislation. We shall consult freely to ensure that they are all on the list, and then there can be no doubt about which islands qualify for this special treatment.
On the question of the servicing of the vehicles, I shall write to the hon. Member for Argyll and Bute about the particular point that she raised.
On the issue of proving that a lorry is island-based and the hon. Lady's other request that all weights of vehicles should be given the £150 concession, we asked ferry companies whether they reliably recorded the registration numbers of vehicles, and it seems that some do but some do not. There is the additional problem that, if an operator were applying for a licence for the year ahead, he would be providing documentation, if that system were accepted, for the previous year, which of course is not exactly the same thing.
Therefore, I think that we have got it right, to give the smaller vehicles an essentially unlimited mileage on the mainland, if drivers wish it, for the £150 concession, provided that they can show that they are island-based.
Larger vehicles—articulated lorries and vehicles which weigh more than 17 tonnes—may, as I outlined initially, make trips on the ferries to the mainland and may unload and load in the environs of the port, which is defined as being within 5 km. But if we were to agree that they could cover unlimited mileage on the mainland in addition, they would start to provide a form of unfair competition to operators based on the mainland, because they would be in receipt of a considerable and valuable concession. The difference between£150 and—possibly—up to £5,000 for the biggest articulated lorries would start to give them a considerable advantage.

Mr. Wilson: I would like to clarify which objection prevails. If the main objection is about the ferries, then, as the Paymaster General has indicated, it is a very flimsy ground on which to refuse to extend the concession.
I shall not take the time of the House, but it could be very easily established whether there was a pattern of regular travel between an island and the mainland. As the Minister recognises, some of the ferry companies keep such records. We are talking only about a handful companies at most, and certainly every hon. Member present is talking only about one company—the state-owned Caledonian MacBrayne. There is not the slightest difficulty in establishing the required information.
If the main objection is based on the other grounds that the Minister has given, I would challenge it differently. Since the amount of money involved is bigger with larger lorries, the real economic cost to the islands will be paid through that higher excise duty. I ask the Minister to look at that case in the same constructive spirit that he has applied to smaller vehicles.

Mr. Heathcoat-Amory: I am describing to the House how we have looked at it in great detail, and I have given a practical objection to what was a good and original idea—to use the receipts from the ferry tickets as a way in which to show that a vehicle is genuinely island-based.
Although, of course, the ferry operator Caledonian MacBrayne is familiar to the hon. Gentleman, I must remind him that other islands are not off the coast of Scotland. We are also referring to a number of English islands which are reached through a different operator, and it is our information that not all the operators reliably record the vehicle registration numbers. In addition, I cited the problem that documentation is retrospective, whereas the award of a concession is prospective: for the year ahead.
I was about to describe a more general and separate objection, which is that, if a large, valuable vehicle based on an island is given the right to undertake unrestricted mileage on the mainland for the payment of only £150 per annum, it would begin to compete unfairly with the mainland hauliers. I therefore think that we are right to restrict the concession to small vehicles for the unlimited mileage, with larger vehicles having to be either for island use or for undertaking journeys to and from the mainland.
I hope that we have met the main objections. I was certainly genuinely impressed by the case that was made. Of course we shall keep the matter under review, but I am not willing to make any further concessions now, because I believe that we have reached a sensible conclusion to a difficult and complex issue.
Amendment agreed to.

Mr. Deputy Speaker: I understand that it will be for the convenience of the House if I put all the remaining amendments together.

Amendments made: No. 62, in page 177, line 2, leave out
'with a revenue weight exceeding 44,000 kilograms'
and insert
'which has a revenue weight exceeding 44,000 kilograms and is not an island goods vehicle'.
No. 63, in page 178, leave out lines 22 to 26 and insert—
'"(2) The annual rate of vehicle excise duty applicable—

(a) to any tractive unit which is a showman's goods vehicle with a revenue weight exceeding 3,500 kilograms but not exceeding 44,000 kilograms, and
(b) to any tractive unit which is an island goods vehicle with a revenue weight exceeding 3,500 kilograms,

shall be the basic goods vehicle rate.'.
No. 64, in page 178, line 28, leave out
'with a revenue weight exceeding 44,000 kilograms'
and insert
'which has a revenue weight exceeding 44,000 kilograms and is not an island goods vehicle'.
No. 65, in page 179, line 5, at end insert—
'(19) The following shall be inserted after paragraph 17—
"Meaning of 'island goods vehicle'
18.—(1) In this Part 'island goods vehicle' means any goods vehicle which—

(a) is kept for use wholly or partly on the roads of one or more small islands; and
(b) is not kept or used on any mainland road, except in a manner authorised by sub-paragraph (2) or (3).

(2) The keeping or use of a goods vehicle on a mainland road is authorised by this sub-paragraph if—

(a) the road is one used for travel between a landing place and premises where vehicles disembarked at that place are loaded or unloaded, or both;
(b) the length of the journey, using that road, from that landing place to those premises is not more than five kilometres;
(c) the vehicle in question is one which was disembarked at that landing place after a journey by sea which began on a small island; and
(d) the loading or unloading of that vehicle is to take place, or has taken place, at those premises.

(3) The keeping or use of a goods vehicle on a mainland road is authorised by this sub-paragraph if—

(a) that vehicle has a revenue weight not exceeding 17,000 kilograms;
(b) that vehicle is normally kept at a base or centre on a small island; and
(c) the only journeys for which that vehicle is used are ones that begin or end at that base or centre.

(4) References in this paragraph to a small island are references to any such island falling within sub-paragraph (5) as may be designated as a small island by an order made by the Secretary of State.
(5) An island falls within this sub-paragraph if—

(a) it has an area of 230,000 hectares or less; and
(b) the absence of a bridge, causeway, tunnel, ford or other way makes it at all times impracticable for road vehicles to be driven under their own power from that island as far as the mainland.

(6) The reference in sub-paragraph (5) to driving a road vehicle as far as the mainland is a reference to driving it as far as any public road in the United Kingdom which is not on an island with an area of 230,000 hectares or less and is not a road connecting two such islands.


(7) In this paragraph—

'island' includes anything that is an island only when the tide reaches a certain height;
'landing place' means any place at which vehicles are disembarked after sea journeys;
'mainland road' means any public road in the United Kingdom. other than one which is on a small island or which connects two such islands; and
'road vehicles' means vehicles which are designed or adapted primarily for being driven on roads and which do not have any special features for facilitating their being driven elsewhere;

and references in this paragraph to the loading or unloading of a vehicle include references to the loading or unloading of its trailer or semi-trailer."'.
No. 66, in page 179, line 36, after 'weight', insert—
'(ba) the place where the vehicle has been or is normally kept,'.
No. 67, in page 181, line 4 at end insert—
'. In section 60(2) of the 1994 Act (orders subject to annulment), after "section 3(3)" there shall be inserted ",paragraph 18(4) of Schedule 1".'.
No. 70, in page 194, line 41, leave out 'that Schedule' and insert
'Schedule 1 to the 1994 Act'.—[Sir George Young.]

Schedule 8

LIFE ASSURANCE BUSINESS

Amendments made: No. 35, in page 216, line 2, leave out from second 'business' to end of line 44 and insert
'with a policy holder or annuitant not residing in the United Kingdom, and
(b) in the case of reinsurance business, is—

(i) reinsurance of life assurance business with a policy holder or annuitant not residing in the United Kingdom, or
(ii) reinsurance of business within sub-paragraph (i) above or this sub-paragraph.'.

No. 41, in page 216, line 45, leave out 'subsection' and insert 'subsections (7A) and'.
No. 36, in page 216, line 45, leave out 'subsections (2) to (4)' and insert 'subsection (1)'.
No. 42, in page 217, line 7, leave out 'subsection' and insert 'subsections (7A) and'.
No. 37, in page 217, line 7, leave out 'subsections (2) to (4)' and insert 'subsection (1)'.
No. 43, in page 217, line 10, at end insert—'
(7A) Subsections (5) and (7) above do not apply if—

(a) the rights conferred by the policy or contract for the business are held subject to a trust,
(b) the settlor does not reside in the United Kingdom, and
(c) each beneficiary is either an individual not residing in the United Kingdom or a charity.

(7B) In subsection (7A) above—

(a) "settlor" means the person, or (where more than one) each of the persons, by whom the trust was directly or indirectly created (and for this purpose a person shall, in particular, be regarded as having created the trust if he provided or undertook to provide funds directly or indirectly for the purposes of the trust or made with any other person a reciprocal arrangement for that other person to create the trust),
(b) "beneficiary" means any person who is, or will or may become, entitled to any benefit under the trust (including any person who may become so entitled on the exercise of a discretion by the trustees of the trust), and

(c) "charity" means a person or body of persons established for charitable purposes only;

and for the purpose of that subsection an individual who is a trustee (of any trust) shall not be regarded as an individual.'.
No. 38, in page 217, leave out lines 28 to 35.
No. 44, in page 217, line 49, after 'from' insert 'trustees or'.
No. 48, in page 222, line 27, at end insert—
'Receipts to be brought into account
.—(1) For section 83 of the Finance Act 1989 substitute—
"Receipts to be brought into account
83.—(1) The following provisions of this section have effect where the profits of an insurance company in respect of its life assurance business are, for the purposes of the Taxes Act 1988, computed in accordance with the provisions of that Act applicable to Case I of Schedule D.
(2) So far as referable to that business, the following items, as brought into account for a period of account (and not otherwise), shall be taken into account as receipts of the period—

(a) the company's investment income from the assets of its long term business fund, and
(b) any increase in value (whether realised or not) of those assets.

If for any period of account there is a reduction in the value referred to in paragraph (b) above (as brought into account for the period), that reduction shall be taken into account as an expense of that period.
(3) In ascertaining whether or to what extent a company has incurred a loss in respect of that business any amount transferred into the company's long term business fund from other assets of the company, or otherwise added to that fund, shall be taken into account, in the period in which it is brought into account, as an increase in value of the assets of that fund within subsection (2)(b) above.
This subsection does not apply where, or to the extent that, the amount concerned—

(a) would fall to be taken into account as a receipt apart from this section,
(b) is otherwise taken into account under subsection (2) above, or
(c) is specifically exempted from tax.

Meaning of "brought into account"
83A.—(1) In section 83 "brought into account" means brought into account in an account which is recognised for the purposes of that section.
(2) Subject to the following provisions of this section and to any regulations made by the Treasury, the accounts recognised for the purposes of that section are—

(a) a revenue account prepared for the purposes of the Insurance Companies Act 1982 in respect of the whole of the company's long term business;
(b) any separate revenue account required to be prepared under that Act in respect of a part of that business.

Paragraph (b) above does not include accounts required in respect of internal linked funds.
(3) Where there are prepared any such separate accounts as are mentioned in subsection (2)(b) above, reference shall be made to those accounts rather than to the account for the whole of the business.
(4) If in any such case the total of the items brought into account in the separate accounts is not equal to the total amount brought into account in the account prepared for the whole business, there shall be treated as having been required and prepared a further separate revenue account covering the balance.
(5) Where a company carries on both ordinary long term business and industrial assurance business, the references above


to the company's long term business shall be construed as references to either or both of those businesses, as the case may require.".
(2) In section 432B of the Taxes Act 1988—

(a) in subsection (1) for the words from "brought into account" to "1982" substitute "brought into account, within the meaning of that section,"; and
(b) for subsection (2) substitute

(2) Where for that purpose reference falls to be made to more than one account recognised for the purposes of that section, the provisions of sections 432C to 432F apply separately in relation to each account.".
(3) In section 432E(1) of the Taxes Act 1988 for the words from "of the items referred to in subsection (1)" to "paragraph (b))" substitute "to be taken into account in accordance with section 83(2) of the Finance Act 1989 (that is to say, the aggregate amount to be taken into account as receipts reduced by the aggregate amount to be taken into account as expenses)".
(4) In section 436(3) of the Taxes Act 1988, after paragraph (a) insert—
(aa) section 83(3) of that Act shall not apply;".
(5) In section 441(4) of the Taxes Act 1988, after paragraph (a) (and before the word "and" following that paragraph) insert—
(aa) section 83(3) of that Act shall not apply,".
(6) In section 65(2) of the Finance (No.2) Act 1992 for paragraph
(d) substitute
(d) section 83(2) of the Finance Act 1989 (amounts to be taken into account as receipts or expenses);".'.
No. 45, in page 223, line 3, leave out
'beginning on or after 1st January 1995'.
No. 46, in page 223, line 17, at end insert—
'( ) In section 444A of the Taxes Act 1988 (transfers of business) after subsection (3) insert
(3A) Any subsection (2) excess (within the meaning of section 432F(2)) which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available under section 432F(3) or (4) to reduce a subsection (3) figure (within the meaning of section 432F(l)) of the transferor in an accounting period following that which ends with the day on which transfer takes place—

(a) shall, instead, be treated as a subsection (2) excess of the transferee, and
(b) shall be taken into account in the first accounting period of the transferee ending after the date of the transfer (to reduce the subsection (3) figure or, as the case may be, to produce or increase a subsection (2) excess for that period),

in relation to the revenue account of the transferee dealing with or including the business transferred.".
( ) In section 444A(5) of the Taxes Act 1988 for "subsection (2) or (3)" substitute "subsection (2), (3) or (3A)".'.
No. 49, in page 229, line 28, after '82(1)(a)', insert—
'( ) section 83(3) of that Act shall not apply,'.
No. 39, in page 234, line 41, leave out from beginning to end of line 8 on page 235 and insert—
'6A. In section 431D(1), the words "carried on through a branch or agency in the United Kingdom by an overseas life insurance company" shall be treated as inserted after the words "means life assurance business"." '.
No. 50, in page 235, line 40, leave out from beginning to 'substitute' and insert—
'.—(1) Paragraph 8 of Schedule 19AC to the Taxes Act 1988 is amended as follows.

(2) In sub-paragraph (1)—

(a) for "paragraph I" substitute "paragraph IC"; and
(b) for "the word '1982'" substitute "the words 'brought into account, within the meaning of that section,"'.

(3) In sub-paragraph (2) for "paragraph 1(6), (7) or (8)" substitute "any provision of paragraph 1C".
(4) For sub-paragraph (3)'.
No. 51, in page 235, line 44, leave out '1' and insert '1C'.
No. 54, in page 235, line 45, leave out second 'and' and insert 'to'.
No. 52, in page 239, line 21, at end insert—
'.—(1) Schedule 8A to the Finance Act 1989 is amended as follows.
(2) For paragraph 1 substitute—
1.—(1) In their application to an overseas life insurance company sections 83 and 83A of this Act shall have effect with the modifications specified in paragraphs IA to IC below.
(2) In those paragraphs—

(a) any reference to the Taxes Act 1988 is a reference to that Act as it has effect in relation to such a company by virtue of Schedule 19AC to that Act; and
(b) any expression to which a meaning is given by section 11A of that Act has that meaning.

1A.—(1) The reference in section 83(2)(a) to investment income shall be construed as a reference to such of the income concerned as is attributable to the branch or agency in the United Kingdom through which the company carries on life assurance business.
(2) The reference to assets in section 83(2)(b) (as it applies apart from subsection (3) of that section) shall be construed as a reference to such of the assets concerned—

(a) as are—

(i) section 11(2)(b) assets;
(ii) section 11(2)(c) assets; or
(iii) assets which by virtue of section 11B of the Taxes Act 1988 are attributed to the branch or agency; or

(b) as are assets—

(i) (in a case where section 1 IC of that Act (other than subsection (9)) applies) of the relevant fund, or
(ii) (in a case where that section including that subsection applies) of the relevant funds,

other than assets which fall within paragraph (a) above.

(3) In determining for the purposes of section 83(2) (as it applies apart from subsection (3) of that section) whether there has been any increase or reduction in the value (whether realised or not) of assets—

(a) no regard shall be had to any period of time during which an asset held by the company does not fall within paragraph (a) or (b) of sub-paragraph (2) above; and
(b) in the case of an asset which falls within paragraph (b) of that sub-paragraph, only the specified portion of any increase or reduction in the value of the asset shall be taken into account.

For the purposes of paragraph (b) above the specified portion of any increase or reduction in the value of an asset is found by applying to that increase or reduction the same fraction as would, by virtue of section I IC of the Taxes Act 1988, be applied to any relevant gain accruing to the company on the disposal of the asset.
(4) For the reference in section 83(3) to any amount being transferred into the company's long term business fund from other assets of the company, or otherwise added to that fund, there shall be substituted a reference to assets becoming assets of the long term business fund used or held for the purposes of the company's United Kingdom branch or agency, having immediately previously been held by the company otherwise than as assets of that fund or used or held otherwise than for those purposes.


The amount of the increase in value under section 83(2)(b), as it applies in relation to such a transfer, shall be taken to be an amount equal to the value of the assets transferred.
1B. The references in section 83A to the company's long term business shall be construed as references to the whole of that business or to the whole of that business other than business in respect of which preparation of a revenue account for the purposes of the Insurance Companies Act 1982 is not required.
1C.—(1) Where for a period of account any investment income referred to in section 83(2)(a) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it arises in the period.
(2) Where for a period of account any increase in value referred to in section 83(2)(b) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company's records as available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.
(3) Where for a period of account any reduction in value referred to in section 83(2) (as it applies apart from subsection (3) of that section) is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period if it is shown in the company's records as reducing sums available to fund one or both of the following for the period, namely, bonuses to policy holders and dividends to shareholders.
(4) Where in any period of account any such transfer is made as is mentioned in section 83(3) which is not otherwise brought into account within the meaning of that section, it shall be treated as brought into account for the period in which it is made.".
(3) In paragraph 2(7) for the words following paragraph (b) substitute—
and in paragraph (b) above "the specified portion" has the same meaning as in paragraph IA(3)(b) above.
(4) After paragraph 2(7) insert—
(7A) For the purposes of this paragraph any expression to which a meaning is given by section 11A of the Taxes Act 1988 has that meaning.".'.
No. 55, in page 239, line 33, after '(1)', insert—
'The Taxes Act 1988 is amended as follows.
( )'.
No. 47, in page 239, line 42, at end insert—
'.—(1 ) The amendments made by paragraph 16 above have effect in relation to accounting periods ending on or after 1st January 1994.
(2) In the first accounting period of a company ending on or after 1st January 1994 in which the subsection (3) figure for any category of business exceeds the subsection (2) figure, the subsection (2) figure shall be treated as increased by an amount not exceeding the amount or aggregate amount of any subsection (2) excesses in relation to that category of business for accounting periods beginning on or after 1st January 1990 and ending before 1st January 1994, but not so as to produce a subsection (2) excess for that period.
For this purpose the subsection (2) excess for an accounting period beginning on or after I st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.
Expressions used in this sub-paragraph have the same meaning as in section 432F of the Taxes Act 1988.
(3) Where a transfer mentioned in section 444A of the Taxes Act 1988 took place at the end of an accounting period of the transferor beginning on or after 1st January 1990 and ending before 1st January 1994, section 444A(3A) shall have effect in relation to the transfer as if it read—
(3A) Any subsection (2) excess (within the meaning of section 432F(2)) of the transferor for an accounting period

beginning on or after 1st January 1990 and ending before 1st January 1994 which (assuming the transferor had continued to carry on the business transferred after the transfer) would have been available to increase the subsection (2) figure (within the meaning of section 432F(1)) of the transferor in the first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeded the subsection (2) figure—

(a) shall, instead, be treated as a subsection (2) excess of the transferee, and
(b) shall be taken into account to increase the subsection (2) figure of the transferee in its first accounting period ending on or after 1st January 1994 in which the subsection (3) figure exceeds the subsection (2) figure, but not so as to produce a subsection (2) excess for that period,

in relation to the revenue account of the transferee dealing with or including the business transferred.
For this purpose the subsection (2) excess for an accounting period beginning on or after 1st January 1990 and ending before 1st January 1994 shall be determined without regard to the fact that in any other such accounting period the subsection (3) figure exceeded the subsection (2) figure.".'.

No. 40, in page 240, line 12, leave out sub-paragraphs (2) to (4) and insert—
'(2) Where the policy or contract for any life assurance business was made before 1st November 1994, the amendments made by this Schedule (and the repeals consequential on those amendments) shall not have effect for determining whether the business is overseas life assurance business.
(3) Where the policy or contract for any life assurance business effected by a company resident in the United Kingdom at or through a branch or agency outside the United Kingdom was made before 29th November 1994, subsections (5) to (9) of section 431D of the Taxes Act 1988 shall not have effect for determining whether the business is overseas life assurance business.'.—[Sir George Young.]

Schedule 11

PERSONAL PENSIONS: INCOME WITHDRAWALS

Amendments made: No. 78, in page 246, line 41, leave out '70' and insert '35'.
No. 79, in page 247, line 37, leave out '70' and insert '35'.—[Sir George Young.]

Schedule 14

VENTURE CAPITAL TRUSTS: MEANING OF "QUALIFYING HOLDINGS"

Amendment made: No. 72, in page 267, leave out lines 18 to 20 and insert—
'8.—(1) The requirement of this paragraph is that the value of the relevant assets—

(a) did not exceed £10 million immediately before the issue of the relevant holding; and
(b) did not exceed £11 million immediately afterwards.

(2) Subject to sub-paragraph (3) below, the reference in sub-paragraph (1) above to the value of the relevant assets is a reference—

(a) in relation to a time when the relevant company did not have any qualifying subsidiaries, to the value of the gross assets of that company at that time; and
(b) in relation to any other time, to the aggregate value at that time of the gross assets of all the companies in the relevant company's group.

(3) For the purposes of this paragraph assets of any member of the relevant company's group that consist in rights against, or in shares in or securities of, another member of the group shall be disregarded.
(4) In this paragraph references, in relation to any time, to the relevant company's group are references to the relevant company and its qualifying subsidiaries at that time.'.—[Sir George Young.]

Schedule 17

SETTLEMENTS: LIABILITY OF SETTLOR

Amendments made: No. 73, in page 283, line 27, leave out from 'is' to end of line 30 and insert
'remitted to the United Kingdom in circumstances such that, if the settlor were actually entitled to that income when remitted, he would be chargeable to income tax by reason of his residence in the United Kingdom, it shall be treated for the purposes of this Chapter as arising under the settlement in the year in which it is remitted.'.
No. 74, in page 284, line 13, leave out from beginning to 'insert' and insert—
'.—(1) Section 677 of the Taxes Act 1988 is amended as follows.
(2) In subsection (2)(b) after "the amount of insert "that income taken into account under that subsection in relation to".
(3) After subsection (2)(f)'.
No. 75, in page 284, line 16, at end insert—
'( ) In subsection (9) after "one of the events specified in section 673(3)" insert "or, in the case of a sum paid on or after 6th April 1995, in one of the events specified in section 660A(4) or on the death under the age of 25 of any such person as is mentioned in section 660A(5)".'.
No. 76, in page 284, line 16, at end insert—
'. In section 678 of the Taxes Act 1988, omit subsection (7).'.—[Sir George Young.]

Schedule 18

DECEASED PERSONS' ESTATES

Amendment made: No. 60, in page 290, line 48, leave out from 'above' to end of line 50 and insert
'(?the deemed single interest") were an interest of—

(i) except in a case to which sub-paragraph (ii) below applies, the person in respect of whose interest or previous interest the payment is made;
(ii) in a case where the person entitled to receive the payment is any other person who has or has had an interest which is deemed to be comprised in the deemed single interest, that other person; and'.—[Sir George Young.]

Schedule 29

REPEALS

Amendments made: No. 56, in page 343, column 3, leave out lines 20 to 24.
No. 53, in page 343, line 53, column 3, leave out 'paragraphs 1(9) and' and insert 'paragraph'.
No. 77, in page 345, line 23, column 3 at end insert— 'Section 678(7).'.
No. 15, in page 346, line 11, at end insert—


'(8A) STOCK LENDING


Chapter
Short title
Extent of repeal


1988c. 1.
The Income and Corporation Taxes Act 1988
In section 129(1), the words "has contracted to sell securities, and to enable him to fulfil the contract, he".'.



No. 20, in page 349, line 34, column 3, leave out from beginning to end of line 35 and insert—



'In Schedule 9, in
paragraph 27(4) the
words from "who is
required" to the
end.'


No. 21, in page 349, line 36, leave out from beginning to end of line 41.—[Sir George Young.]
Order for Third Reading read.

The Chief Secretary to the Treasury (Mr. Jonathan Aitken): I beg to move, That the Bill be now read the Third time.
The Bill consolidates the Budget strategy of my right hon. and learned Friend the Chancellor of the Exchequer, which is to sustain and strengthen Britain's growing economic recovery. That is now moving ahead powerfully across a broad and virtuous front of low inflation, high exports, rising investment, falling unemployment and solid growth.
That picture is confirmed by last week's publication by the Central Statistical Office of the national accounts, which showed that Britain's national output rose by about 4 per cent. in 1994 as a whole—the highest rate for six years. Britain's is now the fastest growing major economy in Europe, and is forecast to remain so.
That growth has been led by exports, which increased in 1994 by 14 per cent. by volume and by 9 per cent. by value. Those are record-breaking achievements, and they will be helped to power ahead by several clauses in the Bill, which give exporting companies easier access to new sources of capital.
Our exporters are already doing spectacularly well not only in Europe but in the growing markets of the wider world. For example, last year our exports to Brazil increased by 27 per cent., to Singapore by 28 per cent., to South Korea by 28 per cent., to eastern Europe by 21 per cent. and to Malaysia by 35 per cent. The Confederation of British Industry survey published in March shows that the orders in British industry's export order books are at their highest point since records began.
Behind those excellent export figures lie many other success stories. Exports, of course, consist of visibles and invisibles. Invisibles have been consistently strong for many years, and they are now becoming stronger. They will be strengthened further by new clause 12, which was moved by my hon. Friend the Minister of State yesterday and which will establish a gilt repo market, and by schedule 8, which will make it easier for British insurers to do business in Europe and across the world.
As for visible exports, the success story that I can report to the House is the revitalisation of Britain's manufacturing industry exports. Britain is on its way back to being one of the successful workshops of the world, and manufacturing industry is playing a starring role in the recovery.
Output rose by more than 4 per cent. in 1994—the fastest rate of growth since 1989. Manufacturing investment is up by more than 8 per cent. and manufacturing productivity by 4.5 per cent. Manufacturing industry employment increased by 40,000 in the past three months—the best increase for more than 15 years—and unit wage costs in manufacturing industry fell last year, thus making our industry increasingly competitive in the world marketplace.
The clear message from business surveys and forecasters is that with the help of the measures in the Bill the strong performance by our manufacturing industry is expected to continue, just as we expect the surge in inward investment by overseas investors to continue. Many inward investors will be encouraged to come here by clause 35, which again sets Britain's rate of corporation tax as the lowest main CT rate in Europe.
I know that the Opposition rather like to make dismissive and pessimistic noises about inward investment. For example, on 9 May last year the deputy leader of the Labour party was rash enough to say:
After 15 years of this deregulation I don't see much inward investment flooding in".
As we know, the right hon. Gentleman's memory is a little defective sometimes. If he had to enlist the assistance of the constabulary to recognise his own Jaguar car, no wonder he finds it hard to recognise the great car factories that are springing up in Wales, Sunderland, Scotland and in the midlands as a result of inward investment. Perhaps the most appropriate response to that characteristically lugubrious forecast by Labour's deputy leader 11 months ago, would be the refrain from the old folk song, "Oh, no John, no John, no John, no."
The facts of inward investment are so positive and so good for Britain that what we should all be saying enthusiastically is, "Oh, yes Toyota, yes Nissan, yes Samsung, yes Ford Motor Company, yes we welcome you here." As about 635,000 jobs have resulted from inward investment, clearly one of the driving forces behind the welcome expansion of Britain's industrial base has been the simple fact that foreign investors are giving a huge vote of confidence to Britain's economy.
That is a remarkable contrast to the Opposition's vote of no confidence in the Bill that does so much to strengthen Britain's economy. It is a pretty sad reflection on the Labour party that it still takes the old neanderthal socialist view that a profit should be without honour in our own country.
Talking of prophets, I am sorry that the Opposition's in-house Cassandra, the hon. Member for Dunfermline, East (Mr. Brown) cannot be with us today. I understand that he is in Scotland—no doubt striving to stir up gloom and despondency there over the 18 per cent. annual productivity growth north of the border between 1990 and 1995, the 14.6 per cent. surge in Scottish manufacturing exports in 1993, and the 100 inward investment projects a year—two per week—currently coming into Scotland. I wonder whether he is even managing to sound gloomy about the BSkyB inward investment project that is creating up to 1,000 full-time equivalent new jobs in his constituency.
Conservatives will not let the doomwatcher from Dunfermline forget the most incompetent forecast of this Parliament, which he made on 17 March 1993:
1 make one Budget forecast—that, after the Budget, unemployment will rise this month, next month and for months afterwards."—pfficia/ Report, 17 March 1993; Vol. 221, c. 289.]

What actually happened is that ever since the hon. Gentleman made his false prophecy unemployment fell—that month, next month and month after month for two years. Not since the Labour Government appointed a Minister for drought—

Mr. Robert Sheldon: rose—

Mr. Aitken: I think that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) will remember that time. Not since the Labour Government appointed a Minister for drought has a Front Bencher's forecast been proved so resoundingly wrong.

Mr. Sheldon: Surely the biggest forecast of all was the 2.95 deutschmark, which failed miserably. The signal mark of the Government is that they failed to keep us in the exchange rate mechanism; the results of that failure of policy are around us now.

Mr. Alan Duncan: It was a success.

Mr. Aitken: I am finding it difficult to follow the point that the right hon. Member for Ashton-under-Lyne is making. Interest rates are not the subject of forecasts; we are not wise enough—or wild enough—to do any such thing. Certainly, compared with the forecast made by the hon. Member for Dunfermline, East, we have made no mistakes at all.
Unemployment has fallen by 600,000 since that prediction was made, and it is still falling steadily at a rate of 1,000 a day. So the employment news, like the export news, the manufacturing industry news, the low inflation news and the economic growth news, is all good news. The good headlines about what is really happening in the economy will be helped considerably by the small print in the Bill and by the accompanying measures announced by the Chancellor in his Budget.
Work incentives, savings incentives and investment incentives are key ingredients of the Bill. The Government have recognised the cardinal importance of low rates of income tax to preserve work incentives, and the Bill takes a significant step towards our long-term aim, reaffirmed by the Prime Minister in his excellent speech in Birmingham on Saturday—a basic rate of income tax of 20p in the pound. Clause 33 widens the 20p band to £3,200—twice the increase necessary for indexation. That means that one in five of all taxpayers will now pay tax only at the lowest rate of 20p.
Just as employees are being encouraged by incentives to take on work, employers are being encouraged to offer work to new employees. From the day after tomorrow—6 April—employer national insurance contributions will be cut by 0.6 per cent. for employees earning less than £205 a week.
The Bill is doing its best to get more people back to work, by means of the incentives that I have mentioned, but we have not neglected those who are too old to work. The Bill increases the income limit for the age-related personal tax allowance by £430—well above the inflation indexation rate. In a full year, the measure hands back £200 million to nearly 3 million pensioners.
This is a Finance Bill for savers. It extends the very popular tax-exempt special savings accounts—TESSAs—by allowing those who have built up a nest egg in a TESSA to reinvest all or part of the capital that they have accumulated in a new TESSA up to a limit of £9,000 as


soon as their account matures. It also widens the scope of personal equity plans, the enterprise investment scheme and the venture capital trust scheme to enhance the availability of finance and investment for industry, which is an important objective for the Government. The Bill's measures that achieve that should be widely welcomed by all those who understand how a modern economy works.
The Government have grave doubts about whether the Opposition understand how a modern economy works. In our debates, their main preoccupation has not been with Britain's soaring exports, falling unemployment or increasing investment and economic growth. They seem to have an incorrigible aversion to mentioning the good news that is strengthening Britain as a successful world trading nation. That good news includes the fact that we had a £2 billion current account surplus in the second half of last year.
Instead, the Opposition showed an obsession with tax loopholes, share option schemes and executive pay. The Bill has done a great deal to combat tax evasion but the great divide between the Government and the Opposition on the rewards for hard work and enterprise can be simply stated: we are against the abuses of commercial success, but the Opposition are against the rewards of commercial success.
Good rewards are the lifeblood of an enterprise and export-led culture. It is a sign of success when many good businesses, some good business leaders and many good employees get well rewarded as a result of their successful efforts. Such people do not deserve to be described as "fat cats" by Opposition Members. They are simply hard-working people who have earned their rewards because they have contributed to successful businesses.
We are determined to ensure that all Britain's wage and salary earners keep as much of their earnings as possible in their own pockets, and have to pay income tax only at a rate that is as low as we can fairly and prudently keep it. As my right hon. and learned Friend the Chancellor made clear in his speech at the weekend, the time when we can start cutting taxes again is coming closer. When we talk about cutting taxes as soon as it is prudent to do so, let us never forget that sound public finances are a precondition for low taxation, and that sound public finances are what the Government are steadily delivering as we put the world recession behind us.
Although we had to make some unpopular tax increases and painful expenditure cuts, we are forecast to halve the nation's overdraft, or public sector borrowing requirement, between 1993–94 and this year. We plan to eliminate the PSBR and balance the budget by the end of the decade. Such good housekeeping is central to the Finance Bill and to the Budget, but it seems to be terra incognita to Opposition Front Benchers. All they seem to know about good housekeeping is the magazine of that name.
Whenever we try to pin down the Opposition about serious good housekeeping issues, they perform their unconvincing imitation of the three notorious monkeys—see no policy, speak no policy, have no policy. By contrast to those three monkeys, a central thrust of the Government's policy is that we continue to maintain a constant downward pressure on public expenditure. That is why the Chancellor's Budget contained the

announcement that we were cutting £29.5 billion off the planned public expenditure totals during the next three years. The Bill continues that process.
I commend to the House the new clauses so ably moved yesterday by my hon. Friend the Minister of State in relation to the introduction of an open market in the sale and repurchase of Government securities. That sounds a technical subject, but the results are far from technical. As my hon. Friend explained, the arrangements introduced by the new clauses should result in significant savings for the taxpayer on the £20 billion debt interest bill.
The Opposition do not have any serious proposals for controlling or reducing public expenditure. If one probes behind the Front-Bench monkeys' posture of see no policy, speak no policy, have no policy, one discovers pork barrel after pork barrel of ill-concealed public expenditure increases. For example, Opposition Front Benchers kept quiet about their policies on pensions when we debated clauses 56 to 59, which relate to pensions. It was with surprise that one picked up The Observer on 12 March to read the headline
Pensions for anyone of 60 says Labour".
The story went on:
Under plans to be unveiled by the Labour party this week…the proposals would mean that people could get a pension five years earlier than under government plans for a retirement age of 65".
The article reported that the shadow Social Security Secretary had persuaded Labour's Treasury team that his new policy would be cost-neutral. I hope that we can now be told the truth by the hon. Member for Oxford, East (Mr. Smith), and that he will unveil his miraculous cost-neutral policy that offers to pay pensions five years ahead of schedule. One estimate is that such a policy might cost the taxpayer £13 billion. We would all like to hear how it could possibly be cost-neutral, and the hon. Gentleman could also explain why he did not unveil that miraculous new policy during debates on the Bill. I think we should be told.
That is not the only explanation that we want. Veiled in the semantic obscurity of bland buzz words that are almost incomprehensible in their cost implications to the man on the Clapham omnibus, one will hear time and time again—especially in the speeches of the hon. Member for Dunfermline, East—expensive new Labour mantras such as "greater use of capital receipts", which is worth some £6 billion, "new regional assemblies and development agencies", "the introduction of a defence conversion agency", "a growth strategy for Europe"—[HoN. MEMBERS: "Hear, Hear.] Opposition Members are cheering, but they should wait until they hear the price tags. Reference is also made to "increased investment in economics and social fabric" and "an emergency employment programme to get people back to work", not to mention the notorious "post neo-classical endogenous growth theory".
What the artful dodgers on the Opposition Front Bench must face up to is that those high-falutin' plans add up to a number of public spending promises, and promises have prices. The real price that will have to be paid for such departures from the foundations of sound public finances on which this Bill is built is higher taxation.
The Opposition Front Benchers do not dare admit it, but the cat has been let out of the bag by the Labour party's most influential eminence rouge on its Back Benches, the former deputy leader and shadow Chancellor, the right hon. Member for Birmingham,


Sparkbrook (Mr. Hattersley). His words in one of his many columns—this time in The Guardian on 13 March—will live in political infamy as they are quoted up and down the country in the coming months. He said:
Labour now has a clear choice. It can either be the Party of higher taxation and proud of it, or the Party of higher taxes which it is ashamed to describe, afraid to admit and incapable of calculating with any accuracy. It cannot be the low taxation Party.
Amen to that. The candid right hon. Gentleman has poured egg over the faces of the Opposition's Front-Bench team.
The Opposition like higher taxation, and they are proud of it. They will inevitably have to increase the PSBR to the point where the initials stand for plunder, spend, borrow and raid. They now want to oppose the policies in the Bill and the Budget which are underpinning sound public finances, improving exports, encouraging investment, reducing unemployment, creating the best growth record in Europe and offering the British people higher real disposable incomes. We are on the right track, and the Bill will keep us there. I commend it to the House.

Mr. Andrew Smith: Unlike the Chief Secretary to the Treasury, I shall talk mainly about the Finance Bill. First, let me dismiss what comprised 90 per cent. of his speech. I should have thought that the right hon. Gentleman would be the first person not to take too much notice of what he reads in the newspapers, whether it be our plans or on other matters.
The right hon. Gentleman made claims about the state of the economy and the achievements of our exporters, but if he believes that the Labour party will let this Government, after all they have done, walk off with the credit for the hard graft of our exporters, workers and managers, he is a bit too arrogant and complacent and he does not understand the British people. They know the mess that the Government's failures have got this country into. They know about the huge and irresponsible borrowing that the Government have stacked up, and they know that the Government broke every promise they made before the election.
We hear talk from Conservative Back Benchers and from the chairman of the Conservative party, which the Chancellor is frantically trying to damp down, about tax cuts being on the way. That comes a bit rich from a Government who have not yet finished driving through all 20 of their tax increases since the election, which have added £812 extra in tax burden, year-on-year, to a typical family. All that, when living standards fell last year and are falling this year. That extra tax burden, which is in breach of every promise that the Chief Secretary and his hon. Friends made at the last general election, is what people will remember. I think that that takes care of 90 per cent. of the right hon. Gentleman's speech, and now to the Finance Bill.
The first thing to report is that this is a very different Bill from the one that confronted us on 17 January on Second Reading. The fact that it is so different is a great tribute to the work of my hon. Friends, the arguments that they mounted and the campaign that they undertook. Labour, assisted on occasion by some Conservative Members and rather less often by the Liberal Democrats, has forced substantial changes on the Government.
We started with the Government's momentous defeat on value added tax on fuel on the Floor of the House—we did not hear much about that from the Chief Secretary. In Committee, they were also defeated on the tax simplification proposal of the hon. Member for Beaconsfield (Mr. Smith). I understand that that was the first time in the memory of the Clerks that a new clause tabled by anyone other than the Government had been added to a Finance Bill.
Labour has mounted effective pressure in the country on the matters covered by the Bill, which forced the Government to back down, for example, on the extension of tax privileges for executive share options to part-time directors, when even Ministers had to recognise that what they were advocating was indefensible. There is a string of other changes, from vehicle excise duty to the level of pools betting duty, where the Government have been made to change their position, whether by the force of votes or public opinion, or the force of argument.
It is worth running through the changes that make this such a significantly different Bill: the Government's defeat on VAT on fuel on the Floor of the House, when we held it at 8 per cent; the forced withdrawal of the Government proposal to extend tax breaks on executive share options to part-time directors; the prevention, or at least the damage limitation exercise as my hon. Friend the Member for Western Isles (Mr. Macdonald) described it, of the imposition of vehicle excise duty on carriers on the Scottish islands and the Scilly Isles; the fact that we stopped the Tories increasing vehicle excise duty on farm vehicles, which was set to increase to a maximum of £5,000; the fact that we forced a cut in proposed vehicle excise duty on recovery vehicles, from the Government's proposed maximum of £5,000 to £750; the fact that, earlier today, we secured concessions on the tax treatment of capital borrowing from the Government for housing associations and universities; the fact that we defeated the Government in Committee, with the help of the hon. Member for Beaconsfield, to secure examination of the simplification of the tax system; the fact that we successfully proposed taxation changes to assist settlements for accident and injury victims; the concessions that we won for disabled drivers of company cars; the exemption from duty for non-prize amusement machines; and the 5 per cent. reduction of pools betting duty, to 32 per cent. It is a formidable list.

Mr. Aitken: The hon. Gentleman is using the royal "we" so wildly that I feel I must be listening to the film, "The Madness of King George". Not one Labour amendment was carried and so the idea that all that was due to Labour's influence is rubbish. My hon. Friends and I rightly listened carefully to representations from industry and others, but the notion that Labour should get one ounce of credit shows that power has gone to the hon. Gentleman's head.

Mr. Smith: The biggest concession of all, on VAT on fuel, was forced on the right hon. Gentleman and the Government Front Bench.

Mr. Heathcoat-Amory: rose—

Mr. Smith: The fact that we have been so successful on this Bill is obviously getting to Ministers and is bringing them to the Dispatch Box. They are worried that we have been an effective channel for public opinion on


the issues in the Bill and that, one way or another, we have helped to secure so many changes; clearly, that upsets them.

Mr. Heathcoat-Amory: If the hon. Gentleman was so against the imposition of value added tax on domestic fuel and power, why did not the Labour party support the amendment tabled by another Opposition party to reduce the rate from 8 per cent. to 5 per cent?

Mr. Smith: Because everyone knew that that was an opportunist amendment—[HON. MEMBERS: "Ah!"] Conservative Members know that is true. That amendment could have resulted in the loss of the change in VAT to 8 per cent. It could have forced it back to 17.5 per cent., which is where the Conservative party wanted it. Having won that victory, we were determined that we would do nothing to put the rate at risk, nor will we do anything this evening that would put it at risk, but more of that later.
I was surprised to hear the Chief Secretary claim a share of the glory on the Government side for what has happened to the Finance Bill because he had little to do with it in Committee. On one visit, we saw him reading Will Hutton's book, which resulted not in radical amendments to the Bill but in a rather acerbic review in The Sunday Times in which he conceded that
British businesses are still finding it difficult to adjust to the new economic environment"—
that is one way of putting it. He continued:
Successful competitiveness can be uncomfortable.
That obvious reference to his rivalry with the Secretary of State for Employment, the right hon. Member for Enfield, Southgate (Mr. Portillo), who is going to lead the Conservative party from the right in opposition, prompted me to compare their contributions to Finance Bill proceedings. I am sorry to say that it is not all good news for the present Chief Secretary, who has not been doing enough to display his talents. The sad truth is that his right hon. Friend the Secretary of State for Employment, when he was Chief Secretary last year, had spoken more after eight days of the Committee stage than this Chief Secretary did during the entire proceedings. The former Chief Secretary made three times as many speeches in total, five times as many interventions and managed to be present for 87 per cent. of the sittings, as compared to the present Chief Secretary's 44 per cent.
We have heard a good deal in this Finance Bill on performance-related pay. It seems that the matter is in the Chief Secretary's hands and that a bonus will shortly be transferred from the present occupant of the office to his predecessor, perhaps with a well-earned cut for the Financial Secretary, the Minister of State and the Paymaster General, who worked hard on the Bill, as we would all agree.
It would not be fair for me to refer to the work accomplished on the Bill without drawing the attention of the House and the country to the performance of the Liberal Democrats because it was an incredible record. Between them, they were present for barely half the time. They were missing for our crucial tied vote on pools betting duty, their representatives on the Finance Bill Committee are not even here this evening, and they did not turn up in Committee to move their new clauses on child care. It will not escape the notice of the country that, when it comes to action on child

care or anything else for that matter, people can look with confidence to the Labour party, not to the Liberal Democrats. We have taken our opportunities to improve this Bill where they have relinquished theirs.
As a consequence, there is much in the Bill that is better than when it started. Areas of concern remain, however. Even with the small amendments to the regime on venture capital trusts, allowing a larger proportion of non-voting shares, which the Government conceded yesterday and which responded in part to points that my hon. Friend the Member for Dudley, West (Mr. Pearson) and I made earlier, we remain concerned that the venture capital trusts and enterprise investment scheme provisions in the Bill may do more to attract savings into property-backed, lower-risk investments than into the higher-risk, higher-tech areas intended, but we shall see what happens as the scheme proceeds.
As we said yesterday, we remain concerned, too, that the introduction of self-assessment in taxation contains some big hostages to fortune on which, as we enter a general election period, the Chief Secretary and his hon. Friends may yet have cause to regret opposing our proposed postponement.
When people look at the Bill, they will see that its most outstanding political aspect is the Government's defeat over the rate of VAT on fuel. People will remember that, when the Conservatives were banging through tax increase after tax increase—20 in total, adding up to an extra £812 imposed on a typical family—the only tax cut was in the prospective rate of VAT on fuel. They will remember that Labour's campaigning and votes, along with those of the smaller parties and a handful of Conservative rebels, won that tax cut for the general public. The Bill incorporates that victory, which is one of its most important features.
As I said in Committee on the Floor of the House, the Opposition intend to put neither that VAT victory nor their other gains at risk. That is why we shall not divide the House against giving the Bill a Third Reading tonight. No one should suppose, however, that this Bill is enough. Britain needs effective action for jobs, investment and partnership to create a truly dynamic economy and a fair society. For that, we need a different Finance Bill and a different Government.

Mr. Forman: At the end of our debate on this Finance Bill, which has, on the whole, been good humoured, I can strike agreement with the hon. Member for Oxford, East (Mr. Smith) on one point: his strictures on the Liberal party. I have personal experience of coping with the Liberals in my constituency, and his point was well made.
The Finance Bill, and the two Budgets of which it is the legislative consequence, are the latest welcome instalment of the Chancellor's prudent and successful fiscal policy. It is prudent because it has sought to restrain public expenditure by some £24 billion over three years, off the control total. It has also sought to achieve a broadly neutral fiscal adjustment for 1995–96. It is successful because it has contributed to greater confidence in the financial markets, measures to improve the supply side of the economy and the continuing economic recovery based on non-inflationary growth, which, as my right hon. Friend the Chief Secretary said, is helping to reduce unemployment by about 1,000 a day and to create new wealth and jobs.
The nature of that recovery and how we are prospering here and overseas has many interesting aspects. One of the more interesting facts that was not picked up in the Sturm and Drang of parliamentary questions to the Chancellor on Thursday was the point that he made in answer to a question about trade with the far east. He pointed out that
we have now restored the old level of investment that Britain used to have before its past portfolio went during the wars, and the flows into this country are extremely valuable—as valuable as visible trade to the well-being of this country."—[Official Report, 30 March 1995; Vol. 257, c. 1172.]
The importance of both inward investment, which is often debated in the House, and remittances, which is the point that the Chancellor was making, can be underestimated. In a global economy, we must all pay more attention to those valuable aspects of our income flows. Overseas assets can be beneficial to this country, as other countries such as Japan are finding. It is not just a matter of retaining confidence here to attract inward investment; it is also a question of creating a fiscal and monetary structure within which our firms, many of which are now multinational, can prosper and invest successfully overseas. This country can see the benefits of that repatriated income later on.
In those satisfactory circumstances, it would be folly for the House to follow any of the Opposition's economic advice. The House and the country should note that, in this respect, both the Labour and Liberal parties are, by instinct and tradition, high-spending parties.

Mr. Peter Ainsworth: The Liberals have gone.

Mr. Forman: Yes, I see that they have gone.
If the Labour and Liberal parties are high-spending parties, they are unavoidably parties of high taxation and borrowing. I remind the House that the last Labour Government—that seems a long time ago—introduced the highest marginal rates of tax on income in peacetime history. The present Labour party has voted against nearly every income tax cut made by this Government over the past 15 or 16 years. Furthermore, records show that Labour Governments tend to borrow more than Conservative Governments. For example, the 1974 to 1979 Labour Government borrowed, on average, nearly 7 per cent. of national income a year whereas, since 1979, in spite of the difficulties of two recessions, we have borrowed on average 2 per cent. a year.
Not the least important point about that broad contrast between the two sides of the House is that the views that I now put to the House are largely shared by the unsentimental and realistic British public, particularly as represented in a recent MORI poll published in The Times. It showed that 62 per cent. of the middle classes expected a future Labour Government, were there to be one, to increase the burden of income tax; 23 per cent. thought that their standard of living would decline rather than improve under a Labour Government; 21 per cent. thought that a future Labour Government would not keep their promises; and 38 per cent. doubted—indeed, disputed—the idea that a future Labour Government would keep inflation under control. If the current political scene is a battle for the hearts and minds of the middle class and middle England, we can see that those people have

already understood, perhaps more clearly than we sometimes give them credit for, exactly where the national advantage and their own advantage lie.

Mr. Betts: In response to the hon. Gentleman's comment that 21 per cent. of the middle class would not expect a future Labour Government to keep their promises, has he any idea what percentage of middle England would expect a Conservative Government to keep their promises, given what we have seen in the past few years?

Mr. Forman: I would need notice of that question, because the poll on which I draw focused principally on the Labour party's struggle to convince the middle class.
In case people are tempted to think that Liberal policy is anything more than what I believe it to be, which is a dilute version of Labour policy, they need only look at Liberal policy in areas of the country where, temporarily, the Liberals control local authorities to see the extent to which their spending policies are irresponsible and even feckless as they do not give correct priority to sensitive areas such as education.
I commend my right hon. Friends on the Front Bench for the various parts that they have played in this Finance Bill, and I commend the Chancellor and the Government as a whole on introducing yet another prudent and successful Budget.

Mr. Sheldon: I rise only briefly to express my appreciation of the work of the Opposition Front Bench and the way in which they have handled this Finance Bill.
We are in the shadow of the consequences of black Wednesday. The Government pledged themselves to maintain a deutschmark at 2.95 and failed miserably when the crunch came. We now have a deutschmark at 2.20 or 2.34 and a dollar at 1.60. For the first time in my 30 years in the House, I feel that the exchange rate is about right. Until now, it has always been wrong. It is the English genius to achieve things through mistakes, and that is how the Government have brought about a proper and defensible exchange rate. I would not like it to go any lower. Every time that I have made this sort of speech, I have said that I wanted lower exchange rates to encourage investment and our manufacturing exports. Now we have it about right, so will the Government please just leave it alone and let it continue to provide the wealth that the country needs?
The Government will now make the great mistake of talking about future tax changes. They should understand that the Chancellor of the Exchequer needs flexibility. One cannot decide those things two years in advance; surely the reversal of the decision on VAT on domestic fuel showed that. One must make a judgment at the time. It is wrong to limit the Chancellor in any way.
I would draw attention to the fine tuning that we now have using interest rates. Conservative Governments in the past always opposed fine tuning. Now they talk about quarters of a per cent. in those matters.
The monthly meeting of the Chancellor of the Exchequer and the Governor of the Bank of England is one of the worst decisions of all. Denis Healey used to say to the Governor of the Bank of England, Gordon Richardson, "I wish I had your job." Today, the Governor


of the Bank of England has much more power than he ever had then. I am pretty sure that the present Chancellor of the Exchequer would like to change jobs, too.
Finally, I congratulate my hon. Friends on the Labour Front Bench on achieving one of the great reverses, on VAT on fuel. That will be something for which they will be long remembered and long appreciated.

Mr. John Townend: Never in my parliamentary life have we debated the Finance Bill against such a favourable economic background; yet the hon. Member for Oxford, East (Mr. Smith) says that we are in a mess. Underlying inflation 1.8 per cent. last month, exports soaring—we are in a mess. The balance of payments in balance—we are in a mess. Unemployment coming down month by month—and the hon. Gentleman says that we are in a mess.
The French level of unemployment is now—

Mr. Andrew Smith: Will the hon. Gentleman give way?

Mr. Townend: No; I have only four minutes.
The French level of unemployment, with a socialist President, is now 50 per cent. more than ours. The Spanish level of unemployment, with a Socialist Government, is treble ours. The budget deficit is decreasing and we have a budget deficit reduction plan that will bring us into balance by the end of the decade.
My only regret is that to bring that budget deficit under control we have had to accept tax increases, the last of which are in the Budget. I broadly approve of the Government's strategy, but everyone knows that I always prefer to cut public expenditure instead of increasing taxes. I welcome the fact that the Government now appear to have accepted that, henceforth, our first priority must be to cut public expenditure.
I say to my right hon. and hon. Friends on the Government Front Bench that we need to launch a crusade against overmanning, extravagance and waste in the public sector. Wherever one looks in the public sector, at local government level or at national Government level, one can find glaring examples of the taxpayer's money being unnecessarily spent. I have about 20 examples here. Time will not allow me go into them, but I shall take them up in due course with my right hon. Friend the Chief Secretary to the Treasury.
The public sector is bloated. If one questions that point of view, one has only to consider the privatised industries. Who would have believed that they could slim down their work force so much while improving the service to the customer and reducing charges in real terms? Indeed, their great success is one of the reasons why we have been embarrassed by the profits made and the share options given. No one dreamed that the nationalised industries were so overmanned.
If we could achieve only 50 per cent. of the savings in manpower that the privatised industries have made or that every private firm that had to slim down during the recession has achieved, we would have no difficulty in cutting taxes substantially.
I hope that this Finance Bill marks the end of an era in two respects. First, never again should we have a Finance Bill as long as this. It shows, in my opinion, that the Inland Revenue is out of control. It is obsessed with the minutiae of tax avoidance and benefits in kind. The Institute of Chartered Accountants described the Bill as "another dose of obscurity" and protested about the complexity in drafting style. I therefore welcome the Treasury's proposals to consider giving the work of drafting future Finance Bills to the private sector.
I hope that the Bill before us will be the last Finance Bill for many, many years in which the overall burden of taxation is increased. I can assure the Chancellor that he will have all my support in achieving those aims. I am sure that, with our present Chief Secretary to the Treasury, after the spending round this year, when we come to the Budget in November, we shall see the start of many, many Conservative Budgets when the burden on the taxpayer is reduced.
The Conservative party is the party whose philosophy is that we should leave as much money as possible in the wage earner's pocket, because we believe that he can take decisions about the way to spend his money better than the Government can. The Opposition believe that they should take as much money out of the wage earner's pocket as possible, because they believe that the state can take decisions better than the individual. That is the big difference between us. That is the blue water.
I commend my right hon. and hon. Friends on the Government Front Bench for all their efforts to reduce public spending.

Mr. Denis MacShane: The economic illiteracy that we have just heard, and that we heard in the opening speech, is great even by the standards of the Conservative Benches. The plain fact is that, when the Conservatives entered office in 1979, Britain stood fourth or fifth in per capita gross domestic product in Europe; we now stand 1 lth, sinking down the world league tables of growth and distribution. No economic legerdemain can reduce that fact.
I shall return to the Bill, because that is what we are here to debate, Mr. Deputy Speaker. First, it is an extraordinarily regressive Bill. In spite of the great victory won last November, when the proposal for VAT at 16 per cent. was defeated, nearly every measure proposed in the Bill—we do not have time to go through the clauses—has been regressive.
Secondly, where I do agree with the hon. Member for Bridlington (Mr. Townend) is that, at 351 pages, the Bill is far too long.
Thirdly, the Bill is absurdly complex—more complex than any comparable legislation for any other Organisation for Economic Co-operation and Development country of the same size.
Fourthly, it is a remarkably insular, inward-looking Bill. An amendment to clause 123, in which there was a suggestion of examining ways in which we might consider taxation internationally, was thrown out in Committee.
Fifthly, it is an extraordinarily short-term Bill. Thank goodness the hon. Member for Eastbourne (Mr. Waterson) was successful in moving his amendment on shipping, with our support, and the Government finally accepted


that, because that measure extended slightly the time scale to back the tax relief necessary for our shipbuilding industry. However, for every other measure, the continual refrain was of resistance to the development of what one might call patient capitalism.
Sixthly, without question, it was a Bill designed in the Ritz and very much for the Ritz. Treasury Ministers made their
proper prostrations to the Gods of the market-place",
but underlying the focus of the Bill is a shift from a wage-earning to a rentier society. That should worry anyone who believes that income should be related to hard work, not to turning up now and then to sign off, or not as the case may be, on arms exports to a country under ban from the United Nations.
Seventhly, in the handling of the Bill there was some arrogance on the part of the Treasury Ministers. What does one expect from three Old Etonians and one Old Harrovian, all at Oxford? It was old England, which, thank goodness, was able to take some advice from new Labour. However, in spite of their politeness, their courtesy—which I acknowledge, because that is the class from which they come—there was a haughty disregard for any of the arguments made by Conservative Members, their colleagues. I ask for no pity or consideration for our opinions, but when their own side made sensible and helpful suggestions—of course very few of them coming from the Old Etonian and Old Harrovian gang—they were knocked back.
Eighthly, this is a profoundly anti-manufacturing Bill. I defy the Financial Secretary, in replying, to identify more than five clauses that will genuinely help industry. Last week, I had the honour of hosting a visit in the House from the Rotherham chamber of commerce. Those on the visit talked about education, skills and the lack of demand. There is nothing in the Bill that helps the manufacturing sector in a concrete way. I was particularly disappointed that the amendment on employee share ownership plans, which was moved by the hon. Member for Carshalton and Wallington (Mr. Forman) and supported by me, was so scornfully rejected.
Ninthly, the Bill is for rentiers, not wage earners. Tax-exempt special savings accounts and personal equity plans have been mentioned. But we must be careful, because we shall face problems in the future if we focus only on unearned income and unearned rents instead of creating a society in which value is added by people's work and income comes more directly from that work.
Tenthly, taxation is more than a contract between Government and the governed. It is the definition of the duties and responsibilities that society accepts in exchange for the freedom to make and spend money as it wishes. It is the equilibrium which is so tragically lacking in our two-nation society. We live in a society of two unbalanced halves, which fiscal policy should seek to connect, one to the other.
We need a major reform of our taxation system. With this Finance Bill, the Conservatives have shown that theirs is the party of high taxation and low lies. Only a new Treasury Front-Bench team can put that right.

Mr. Alistair Darling: I am sorry that we did not hear more from the Chief Secretary to the Treasury during the passage of the Finance Bill. He read

his speech with feeling and we enjoyed it to some extent, but it was thoroughly unconvincing and demonstrated why the Government face difficulties.
It is not surprising that the Chief Secretary did not speak much about the Finance Bill, as he was not present in Committee very often. The only thing that can be said about him is that he was present on slightly more occasions than the Liberal Democrats, who were hardly there at all. One was bound to wonder why they asked for places on the Standing Committee on the Finance Bill—perhaps that is something that the Committee of Selection might want to take into account next year. [Interruption.]
Even as I speak, the Liberal Democrats cannot stand the heat and have withdrawn from the Chamber. The Liberal Democrat Benches now remain empty. I hope that those who sometimes pick up their press releases will ask them exactly how much time they spend in the Chamber when they are given the opportunity to talk about their economic policies or anything else.
My hon. Friend the Member for Oxford, East (Mr. Smith) mentioned that the Chief Secretary was hardly ever in Committee. His absence lends some credibility to his claim that when he was the director of a certain company he did not spend much time there. Clearly, not attending meetings and not being there seems to be a trade mark of the Chief Secretary.
My hon. Friend the Member for Oxford, East also said that the Chief Secretary spent some time reading Will Hutton's excellent book, which was indirectly plugged by my hon. Friend the Member for Rotherham (Mr. MacShane). I also noticed that for some time the Chief Secretary was reading a book entitled "The Law of Islam". I do not know why he was reading it, but perhaps, sooner or later, we will find out what he was so interested in.
The Chief Secretary's speech was unconvincing. He talked about success, but the truth is that people do not feel that they live in a successful country. They do not believe that they are being successful themselves and they do not believe that Britain is successful. The people feel cheated and deceived. They were promised tax cuts in 1992, but they got tax increases—there have been 20 different tax increases since 1993 alone. A typical family is paying ?800 a year more in tax.
The hon. Member for Bridlington (Mr. Townend) talked about the instincts and philosophy of the Government and the Conservative party. We know the Government's instincts—to say one thing during the election campaign and to do completely the opposite thereafter. The Government said that they would reduce taxes year on year. Instead, they have increased taxes year on year. It is no wonder that people do not trust the Conservatives on tax or anything else.
It would have been interesting if, when the hon. Member for Carshalton and Wallington (Mr. Forman) reviewed the opinion poll in The Sunday Times, he had told us its conclusion. If I am not mistaken, despite what he said, the majority of people, no matter where they stand—whether they are on middle incomes, lower incomes or no income—are becoming increasingly disillusioned with the Government and do not believe one word that the Government say about taxation or anything else.
Just last weekend, we were told that there would be a Tory relaunch. We saw the Prime Minister appearing on the Anne and Nick show to announce his relaunch. The


relaunched Tory party is the party that we have known for the past 16 years. It is the party that is prepared to say anything to get elected and do the opposite once given power.
Over the weekend, the Tory party chairman said that he backed a proposal for a rolling programme of tax cuts. He said that that was an excellent idea. A few hours later, the Secretary of State for Employment said that he was not so sure. Tonight, the Chancellor told the Tory Back Benchers to dampen their expectations as there was no guarantee that the Government could deliver.
The Government strategy for relaunching themselves has fallen apart after three days. The truth is that the Government are bankrupt of ideas and have no idea about what to do with this country. What we see now is the Government's desperate attempt to cling to power by holding out the vague hope that there might be something better some time in the future.
We have had 20 tax rises since 1992. The Government may say that their instinct is to cut taxes, but their action shows something different. The only tax cut that we have had in 1995 has been a Labour tax cut, when VAT on domestic fuel was cut from 17.5 per cent. to 8 per cent. That is not all—as my hon. Friend the Member for Oxford, East said, the Opposition have won a string of victories over the Government.
One victory seems to sum up what is wrong with the Government. We heard about it from the hon. Member for Bridlington and the Chief Secretary when they talked about executive share options. This afternoon, the Government were forced to amend a proposal in the Finance Bill to ensure that part-time directors could not exploit the provisions relating to executive share options. What the Government said was instructive. The Chief Secretary to the Treasury seemed to extol the idea that people should be given executive share options without reference to the company's success. That was in stark contrast to the Prime Minister who, at the outset of the Finance Bill, said that nothing could be done, it was nothing to do with the Government and all to do with private companies. But half way through the spring of this year, in the midst of the Finance Bill, the Prime Minister suddenly arrived in the Chamber and said that the granting of share options and huge salary increases in privatised utilities could not be justified. He executed a complete U-turn, which was followed by another one two days later, when it seemed to be suggested that nothing could be done about it.
The Government's attitude to the unwarranted and excessive executive pay options and excessive pay rises in privatised utilities seems to sum up all that is wrong with the Government's tax policy—a complete and utter lack of fairness. They show a complete disregard for fairness, which should be installed within any tax system. Their attitude towards share options and the unjustified pay increases taken by the bosses of privatised utilities sums up everything that is wrong with the Government's approach to tax and fairness.
We welcome good news when we see it, but we criticise the problems that the country still has—the lack of manufacturing capacity, the lack of industrial policy and, above all, the lack of confidence in the Government. We are unimpressed by the casual promises being made

by the Chancellor, the Prime Minister and other members of the Conservative party. People do not trust the Tories on tax or anything else.
We will not oppose the Bill tonight because it contains one crucial benefit for the majority of people in this country: the reduction of VAT to 8 per cent. That is what people will remember about the 1994–95 Finance Bill. They will remember that the Labour party brought the one tax cut for those who face so much hardship and misery.
We shall continue to hound the Government for their failures. We welcome any good news, but the Government have no answers and no suggestions about what we should do in future. The country has lost confidence in the Government. Later this week and at the beginning of next month the electorate in England and Wales will show that they have no confidence in the Government. It will not be long before the electorate turn to a party that has the answers and enjoys the confidence of the people in this country.

Sir George Young: I am grateful to my hon. Friends who spoke in the brief Third Reading debate for reminding the House of the positive measures in the Budget and the positive good news. Underlying inflation is below 3 per cent.—something we have not seen since 1961 for such a sustained time—unemployment is falling by 1,000 a day and the current account is in broad balance. We have inward investment, jobs and an economy that is growing and strengthening.
The hon. Member for Rotherham (Mr. MacShane) was unable to tell his local business men what was in the Budget to help businesses. One of the largest measures, involving some £600 million, was actually for businesses. It was the transitional relief scheme for the business rates—something that had escaped his memory.
The Opposition failed to remind us of some of their new clauses, such as the one which, for the first time, would have provided tax breaks for tax planning. It had all the accountants in the country with their mouths watering. It proposed for the first time tax concessions for tax avoidance.
We heard nothing from the Opposition about this week's reductions in national insurance contributions—something that they overlooked—in addition to cuts in the previous Budget. The cost of hiring someone on half average earnings has fallen from £710 a year in 1993–94 to £610 in 1995–96.
The Opposition mentioned tax increases, but, for an average household, this week's tax increase amounts to no more than the price of a lottery ticket and is dwarfed by the £5 a week by which we expect households to be better off on average after tax and inflation.
There is, indeed, one party that has not come clean with this country on its tax policy—the Labour party. For five months, when the Finance Bill was in Committee, we asked Labour Members time and again basic economic questions. Will they spend more or less than a Conservative Government? Will they tax more or less than a Conservative Government? Will they borrow more or less than a Conservative Government? That is when the sound bites end and the air bites begin. Labour Members have no right to be taken seriously as a party until they come clean on their economic policy.
Nothing has looked so contrived as the Labour party's recent claim to be the taxpayer's friend. Could one imagine Labour Back Benchers piling into a room on the Committee corridor and giving the shadow Chancellor advice on how to reduce public expenditure and the burden of taxation? If they offered such advice, could one imagine him taking it?
The contrast between the advice that the Opposition receive and the advice that the Government receive could not be more stark. I note from today's DailyMail that, whereas my colleagues talk to the Chancellor about reducing taxation, union leaders have been stridently reminding the Leader of the Opposition of their expectations. Not only do Labour Members portray themselves unconvincingly as the taxpayer's friends; they have also sought to represent themselves as standing up for the values of middle England. If they want to play political poker with the Conservative party on traditional values, we will take them on. When they have run out of chips, the Conservative party will have plenty left.
Question put and agreed to.
Bill read the Third time, and passed.

STATUTORY INSTRUMENTS, &c.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): With the leave of the House, I shall put together the Questions on motions 3, 4 and 5.
Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.),

BUILDING SOCIETIES

That the draft Building Societies (Commercial Assets) Order 1995, which was laid before this House on 9th March, be approved.

CHARITIES

That the draft Charities (Trustee Investments Act 1961) Order 1995, which was laid before this House on 13th March, be approved.

FAMILY LAW

That the draft Child Support and Income Support (Amendment) Regulations 1995, which were laid before this House on 16th March, be approved.—[Mr. Andrew Mitchell.]

Infant Formula

Mr. Martyn Jones: I beg to move,
That the Infant Formula and Follow-on Formula Regulations 1995 (S.1., 1995, No. 77), dated 15th January 1995, a copy of which was laid before this House on 16th January, be revoked.
When the new regulations that we are discussing came in, all looked well, briefly. It seemed that at last we had law controlling the advertising of infant formula milks, but it soon became clear that the law was the weakest just where it was most needed. The new regulations allow the advertising of infant formula feeds in the health service, reversing a major part of the World Health Organisation code to which the Government signed up.
The new regulations allow advertising in maternity wards, clinics, doctors' surgeries and all the pre and post-natal wards, just where new mothers are most vulnerable, under the greatest pressure and in need of impartial information, advice and support, and just where the advertisers most want to get at them.
When the Government were consulting on the new regulations, they received 231 letters, 216 calling for a ban on advertising baby milk in the health service, from organisations including the British Medical Association, UNICEF, the Royal College of Midwives, the British Paediatric Association and all 48 of the relevant professional organisations. The only people supporting advertising of baby milk in the health service were the formula manufacturers themselves and—surprise, surprise—advertising agencies. To whom did the Government listen? The formula feed manufacturers.
Save the Children put the case clearly in a letter on 17 February, saying that it is
very disturbing to know that the views of all health, consumer and development bodies have been discounted and only the views of the baby food industry have been taken into account".
Even the baby food manufacturers acknowledge that breast is best. Some may say that I am a living example of that, having been breast-fed. Of course, I may have been a foot shorter and not quite as intelligent had I not been breast-fed.
Breast-feeding develops a better brain, providing vital materials for the links within the brain. Gastroenteritis is 10 times more likely among bottle-fed babies. Infant gastroenteritis costs the national health service £18 million a year. Breast-feeding is acknowledged to protect against respiratory infections, glue ear and diabetes.
The high sugar levels in bottle feeds are one of the major causes of tooth decay in babies, leading to 21,000 cases of dental work on infants and the massive amount of pain and suffering that that causes, yet the new law will allow bottle feeds to be described as "sucrose-free". Some research, still in its early stages, shows that breast-feeding also protects the mother from breast and ovarian cancer.
Humans as a species have been around for at least 4 million years. It stands to reason that the milk produced by our species for our species is best developed for our needs and we should do everything to promote breast-feeding.
Only last week I spoke to representatives of the industry, who told me that advertising is all about promoting one brand over another, gaining market share


and giving information to mothers. However, advertising is first and foremost about selling a product and often companies will sell their product using emotive and pressurising messages. One would have to be naive to believe that baby milk advertising is about giving impartial information to mothers.
We are not anti-choice on the issue; mothers have a right to choose whether to breast-feed. Some mothers are unable to breast-feed for a whole range of reasons and they need to be told which is the best infant formula for their babies by impartial professionals providing correct information, but giving advertisers the run of the health service is not the way to do it.
I am certain that we shall hear from the Government that mothers are grown-up adults who can make up their own minds on whether to believe the advertiser. I am even more certain that it has been a long time since any Conservative Members were in a maternity ward—[Interruption.] Of course, I am sure that that does not apply to the Minister, who looks far too young to be a mother.
I have here a so-called information booklet produced by the infant formula industry. It is supposed to be about breast-feeding. There are two huge centrefolds of babies, one with the caption:
I hope they give me Cow and Gate".
That is in the middle of a document about breast-feeding.
Another caption is even more disgraceful. It states:
Did you know it makes a baby's brain grow?",
referring not to breast milk, but to Cow and Gate. Bearing in mind the latest information on early links within the human brain developed by breast-feeding, that must be an exaggeration, to say the least.
All the images and words send out the message: breast is best, but bottle is just as good, which is simply not true. It is what the Government believe is the best way to give new mothers information about baby nutrition.

Dame Elaine Kellett-Bowman: Is not the hon. Gentleman slightly startled that there is currently one female on the Opposition Benches and four females on the Government Benches?

Mr. Jones: I am not in the least bit startled; it gives me something nice to look at—but I suppose that that is a sexist remark.
All the 48 professional bodies involved in the debate believe that advertising of breast milk substitutes should be banned. Mothers have a right to impartial information, which is currently being denied to them. United Kingdom baby food manufacturers admit to spending at least £4 million to £5 million on straight brand advertising. They also imply that they spend money on sponsorship, which we suspect totals at least £8 million. The Government cannot hope to match that figure, and they spend about £130,000 in supporting breast-feeding.

Dame Elaine Kellett-Bowman: Really?

Mr. Jones: Yes, really.

Dame Elaine Kellett-Bowman: The hon. Gentleman said that Conservative Members have not been in a maternity

ward recently. I have not been in a maternityward as a customer, but I regularly visit the maternity ward in my constituency at Christmas. Our hospital encourages women to breast-feed.

Mr. Jones: I certainly hope that it does. However, it also distributes booklets such as the one to which I referred earlier, which has "Cow and Gate" written all over it, and it distributes advertisements such as the one that I have just shown the hon. Lady.

Dame Elaine Kellett-Bowman: Hospitals in the hon. Gentleman's constituency may, but mine does not.

Mr. Jones: I am very pleased to hear that, but I would like to know how many women in the hospital in the hon. Lady's constituency breast-feed. Perhaps she might ask them that during her next Christmas visit; she may get a shock if she does. Perhaps she would like to give me the figures now.

Dame Elaine Kellett-Bowman: I ask every woman in the ward whether they propose to continue to breast-feed, and three out of four say that they do.

Mr. Jones: I am very pleased to hear it, but that is not the kind of mainstream information that we have received and that the Government push out. I would like the hon. Lady to visit women in clinics and to ask them whether they are still breast-feeding. I think that she will find that they are not, because that is the current trend.

Mr. Cynog Dafis: My daughter-in-law is currently breast-feeding. Are there not statistics available which show the percentage of mothers in the United Kingdom who are breast-feeding'? They reveal that the number is declining and that fewer women are breast-feeding now than were breast-feeding in 1980. Only 53 per cent. of mothers breast-feed their babies at age one week. That is only one statistic and there are more available. The evidence is quite clear.

Mr. Jones: I am grateful to the hon. Gentleman. He is quite correct and I shall refer to those figures in a moment. The fact is that many women would like to breast-feed—no doubt they are among the women whom the hon. Lady meets in her Christmas visits to the hospital. However, an awful lot of women do not continue to breast-feed and one of the reasons is the flood of advertising to which they are subjected.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Angela Browning): What?

Mr. Jones: The Parliamentary Secretary knows that the lowest estimate of spending by baby food manufacturers is £6 per baby. The Government spend only 16p per baby—that is hardly a level playing field. Because of the Government's shabby funding on promoting breast-feeding, for the first time UNICEF was forced to spend money in a western developed nation—in Britain in 1994. The Royal College of Midwives has been forced to produce a booklet that explains simply and fairly the nutritional advantages of mothers' milk over formula, because the Government have not done so.
The World Health Organisation code, which the Government supported and signed in 1991 and for which they reaffirmed their support in 1994, has been completely ignored. Allowing advertising in the health service represents a huge climbdown, and the Government should


admit it. In another place, the Under-Secretary of State for Health, Baroness Cumberlege, stated that the new regulations go beyond the minimum directive requirements of our WHO obligations. The WHO international code on marketing breast milk substitutes states very clearly in article 6.2:
No facility of a health care system should be used for the purpose of promoting infant formula or other products within the scope of this code".
The Government regulations allow advertising in
publications specialising in baby care and distributed to women through the health care system".
It is clear that the Government no longer support the World Health Organisation code.
In a letter of 27 February 1995, the General Synod of the Church of England said:
the new regulations … run counter to the cited articles of the International code".
When speaking on the subject on 22 March, the Parliamentary Secretary had to choose her words very carefully in order to continue the sham that the Government are still following the WHO regulations. She said that the Government now only "support the aim" of the code. We hope to hear better things than the hon. Lady's admittedly uncharacteristic bluster during the previous debate on this subject.
The code was never meant to be a list into which people could dip and take out whatever suited them at the time. It is a full and comprehensive safeguard, which was agreed to globally. Some 11 nations use the entire code as national law and five European countries have banned advertising of breast milk substitutes—that is, France—

Dame Elaine Kellett-Bowman: Has the hon. Gentleman read regulation 7? It states:
No person shall export from Great Britain to a third country an infant formula which is not—

(a) labelled in an appropriate language…
(b) labelled in such a way as to avoid any risk of confusion between an infant formula and a follow-on formula."

Some years ago, a bunch of clergymen asked me to allow a lot of powdered milk to be distributed free in third-world countries. I asked them whether they wanted to kill all the children, because the mothers would probably have used contaminated water and made extra-strong formula. The regulations are quite clear and they must be appended to every export from this country.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. I have been rather tolerant with the hon. Member for Lancaster (Dame E. Kellett-Bowman). It is a short debate of only an hour and a half and many hon. Members are hoping to catch my eye. Long interventions of that nature do not help.

Mr. Jones: I am not sure that the collective noun for clergymen is a "bunch"; possibly it is these days. I think that the hon. Member for Lancaster (Dame E. Kellett-Bowman) is slightly confused; we are discussing the effect of the international code in this country and not in foreign countries.

Dame Elaine Kellett-Bowman: Will the hon. Gentleman give way?

Mr. Jones: No, I will not give way again. We have a lot to get through.
I am sure that later in the debate other hon. Members will refer to independent surveys that have shown that mothers do not want to see a ban on advertising. In fact, I think that the Parliamentary Secretary may have referred to them in the debate on 22 March. That so-called independent bit of research has been undertaken on behalf of Bounty Services Ltd., one of the major distributors of baby milk advertising to mothers in the health service. That is hardly an independent source. I have read the frankly loaded questions in its "independent" questionnaire, and I could have easily written some questions of my own that would reverse the figures that will be cited later this evening. The first question in that independent research states:
There has been a voluntary code in the UK for some years now for the purpose of ensuring that infant formula milk advertising does not cause a reduction in breastfeeding. I believe that this voluntary code should be retained and not replaced with new laws agree disagree neither".
If one were to relate the truth of the matter—that there has been a voluntary code in the UK for some years now, which has not ensured that infant formula milk advertising does not cause a reduction in breast-feeding—I believe that the result would be completely different. It would be far better to ask women whether they would prefer a truly independent information package on breast-feeding. Then we would get overwhelming support from women.
We may also hear later how women give up breast-feeding because of the pressure of going hack to work, which is simply not true. Most women stop breast-feeding in the first few weeks, long before going back to work. They stop because of the huge pressure from advertising and for social reasons. The truth is simple. Breast is by far the best. The Government are paying lip service to promoting breast-feeding while bottling out because of the demands of the baby milk manufacturers.

Mr. Alex Carlile: Ho, ho, ho.

Mr. Jones: I am glad that the hon. and learned Gentleman is awake.
The Government are more than willing to ignore the advice of all the relevant professional bodies, to put at risk the health of the nation and to increase the burden on the taxpayer simply to follow the now tired and discredited dogma that the free market always knows best. Where do those free market profits go? They go to Milupa in Germany; to Heinz and Wyeth, both of which are American companies, and own Farley's and SMA; and to Nutricia in Holland, which owns the good old English-sounding Cow and Gate.
The Government have made a serious mistake with the regulations. They should change their mind and ban baby milk and infant formula advertising as soon as possible, wherever it is promoted.
Let me leave the House with an analogy. Let us suppose that four foreign companies had developed a children's snack food, for example, which was pretty nutritious, providing most nutrients, but which caused increasing gastroenteritis and slowed brain development. Suppose that it was promoted through the education system to the tune of £6-worth of advertising per child. There would be uproar. If on top of that, once the food was tasted, the children could eat nothing else for six months, it would be a national scandal of enormous proportions. What we have in baby milk versus breast


milk is not too dissimilar to the example that I have just described. Baby milk should be available but should not be advertised. The regulations allow that and should be changed.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Angela Browning): I should make it clear from the outset that I agree with everything that was said by the hon. Member for Clwyd, South-West (Mr. Jones) about breast-feeding being the best means of nurturing a baby. I do not think that any of us dispute that fact. He raised many points about the immunity of the child, its resistance to gastroenteritis, and so on. We have no problem with that at all and entirely agree with him. The hon. Gentleman admitted that he was a breast-fed baby, whereas in the Adjournment debate on 22 March the hon. and learned Member for Montgomery (Mr. Carlile) confessed to being a Cow and Gate baby. When it comes to assessing in mature adulthood their intelligence or the way in which they have thrived, I cannot see very much difference between them.

Mr. Alex Carlile: That is an outrage.

Mrs. Browning: I apologise if the hon. and learned Gentleman is outraged. I am simply forming perhaps a feminine opinion of these things. We have heard a lot of male opinion in the debate so far.
The promotion of breast-feeding and the support for it is based on medical advice that is quite unequivocal about the advantages of breast-feeding, both for the mother and for the baby. Government policies have consistently supported breast-feeding, and that is reflected in the steps that we have taken, and are still taking, to promote it. I will cite two examples, but there are more. In 1988, the Government set up the very successful joint breast-feeding initiative, as a pilot project to assess new ways of supporting mothers who choose to breast-feed. In 1992, the national breast-feeding working group was set up and fresh guidance on breast-feeding based on its good work is soon to be issued to the NHS.
There is, then, no doubt about the Government's commitment to breast-feeding, and we believe that the final form of the regulations that we are debating today is compatible with our commitment to breast-feeding. Too often, the criticism that I have heard of the Government is that the regulations have failed to implement the World Health Organisation code. The hon. Gentleman mentioned it today. It was also mentioned in the Adjournment debate on 22 March, and I make no apology for repeating what I said then.
It is not the terms of the WHO code that the Government have to implement in their detailed regulations, but the terms of the European Community legislation. Those who have criticised the Government for not implementing the code also omit one important point. The code states, as does the EC directive—this is critically important, bearing in mind the criticisms that the hon. Gentleman has made—that Governments should

implement measures in a way that is appropriate to their social and legislative framework. That is what we have done.

Dr. Lynne Jones: That may he so, but is not this country free to improve on the regulations so that they are more in line with the WHO code of practice?

Mrs. Browning: The hon. Lady will appreciate that what the Government have done is to put into legislation something that has worked as a voluntary code of practice for many years.
I will now deal with specific points about advertising. Long before the draft regulations were issued for consultation, my right hon. Friend the Secretary of State for Health announced, in answer to a parliamentary question:
The Government are committed to ensuring that the existing restrictions on marketing are, at least, maintained."—[Official Report, 2 July 1992; Vol. 210, c. 680.]
Bearing in mind that commitment, the Government thought it only right at least to explore other options in the draft regulations. Therefore, we initially proposed that the controls on advertising should be quite far reaching, allowing advertisements to appear only in magazines where the intended readers would be professionals involved in maternal and baby care. It was therefore no surprise that the proposed controls generated a considerable number of responses to the consultation, both from the general public and from hon. Members.
In the main, reaction was split between two opposing views. One view, while supporting the proposed advertising controls, held that the Government should go even further and use the directive's option to its full extent, banning all advertising of infant formula. The opposing view was that we should not use that option at all, but should stick to the minimum controls required by the directive. The latter view drew attention to the Government's policy of deregulation and the thrust of my Ministry's legislative programme: to introduce regulation only when there is no viable alternative.
There was also a strong feeling, which I share, that such strict controls would impinge on a mother's right of access to information. Following the Adjournment debate of 22 March, my robust defence of women's right not only to choose but to make informed choices is well documented. Mothers who are not able to breast-feed, or who choose not to do so, have a right to decide for themselves what is best for them and their children. Who are we to say that a mother cannot make a judgment for herself? But she should also have enough information to enable her to make an informed decision.
Industry takes the view—and many may agree—that advertising of infant formula is not about persuading mothers not to breast-feed but to bottle-feed their babies instead; it is about giving mothers who have already decided to bottle-feed information about the infant formulae available, so that they can make their own choices in regard to the products that they wish to select. While not denying the validity of such views, however, the Government are—as I have said—fully committed to supporting the promotion of breast-feeding. We were therefore very conscious of the fact that to adopt only the minimum in the directive would mean controls which were less restrictive than those already in place under the


voluntary agreement with the industry. That, we decided, did not provide the support that the promotion of breast-feeding deserves.

Sir Teddy Taylor: What is the advantage of the directive? Would it not be far better for us simply to make up our own minds?

Mrs. Browning: We are simply putting into law rules that we have had until now in the form of a voluntary code. We are not adding to regulation, or detracting from it; we are simply putting into law something which has worked well, and has been agreed voluntarily for many years.
It was only after careful consideration that we concluded that the option which best served the dual purpose to which I have referred was that which has operated voluntarily and, indeed, successfully in this country since 1983. That means that advertising of infant formula will be allowed to continue—

Mr. Martyn Jones: By what definition has the voluntary code worked? If the Minister is going by breast-feeding rates, let me point out that they have fallen slightly since the voluntary code has been in operation.

Mrs. Browning: I believe that the statistics have remained static during the operation of the code. A telling statistic, however, is the fact that in the five years before the introduction of the code—1975 to 1980–breast-feeding increased by 15 per cent.

Mr. Jones: Is the Minister blaming the Labour Government?

Mrs. Browning: No, I am not. It must be recognised that there is a range of influences on a mother's choice between breast-feeding and bottle-feeding. We want to encourage breast-feeding, but it is not just a matter of whether the mother sees an advertisement or not; I am sure that hon. Members appreciate that many other factors are involved in the decision.
Such methods are surely the best way to ensure that mothers who choose not to breast-feed make that choice in informed circumstances with professional advice readily available to them. That does not mean, as some would argue, that manufacturers will have even more freedom to advertise. In the past week or two, I have been concerned about some of the lobbying on the issue. It seems to imply that a free-for-all exists out there when in fact the reverse is the case.
A number of restrictions apply. Local health care units will continue to make their own judgment about baby care publications—containing permitted advertisements—which they wish to accept for distribution by them, or to be available in places such as waiting rooms of antenatal clinics. They will be screened by health professionals first. The wording of the regulation also specifies that such publications must be
distributed only through the health care system".
It seems only sensible that professionals in the health care system have some controls over the publications distributed through that system.
Much has been made of the fact that, during the consultation, health professional bodies expressed support for a total ban on advertising, but the results of at least one independent survey, to which the hon. Member for Clwyd, South-West referred, seem to suggest that some

of their members think differently. I hope that the hon. Gentleman will accept that a difference of view exists between the bodies which have made representations and the many thousands of individuals at the sharp end of health care.
The survey suggests that a ban on advertising infant formula is opposed by the majority of health care professionals involved in the care of mothers and babies. Surveys have shown that a wide range of complex social, cultural and psychological factors influence a woman's choice on how to feed a baby.
The people behind tonight's debate would have us believe that the restrained and limited amount of advertising that is permitted under the new regulations has an immense influence on mothers, and overrides all other considerations. I, for one, consider that to be nonsense and an insult to the intelligence of women, and especially of health care professionals, who will be able to monitor and vet the material.

Dr. Lynne Jones: Last year I visited the special baby unit at Birmingham maternity hospital, which looks after premature babies. All are fed on human milk, mostly provided by the babies' mothers. Happily, there is a good record of survival, and most go home after their period in intensive care. However, one piece of information that I gleaned from my visit worried me: despite the fact that mothers had been able to express enough milk to meet their babies' needs while in intensive care, most went on to bottle-feed their babies once they had taken them home. Why should that be so, when no one doubts that all mothers want to do the best for their babies, which must mean feeding them in the way nature intended?
As we have heard, clear scientific evidence exists that not only is breast milk best, but the use of infant formulae is damaging to both babies' and mothers' health. Compared with breast-fed babies, bottle-fed infants are twice as likely to suffer from respiratory infections, and five to 10 times as likely to suffer gastroenteritis. Good evidence also exists to suggest that breast-fed babies turn out to be more intelligent—[Interruption.]—why that produces such humour, I do not know—and that breast-feeding reduces the risk of maternal breast cancer.
It is rare for a mother to be physiologically unable to breast-feed; yet it is sad fact that in Britain only about 60 per cent. of mothers start to breast-feed their babies and, worse still, after one week less than half of them continue, compared with Norway, for instance, where more than 90 per cent. of infants are still being breast-fed at three to four months.
I can testify from my own experience that breast-feeding is cheap, easy and convenient. Milk is available any time, day or night, at the correct temperature, avoiding the laborious processes involved in sterilising bottles and in infant formulae preparation. It is also enjoyable for both mother and baby, and best for the restoration of the mother's figure to its pre-pregnant state. With all those advantages, everything seems to be going for breast-feeding. Is it not strange, therefore, that so few women apparently choose to breast-feed? [Interruption.] I do not know why that creates such humour on the Conservative Benches.
The Minister alluded to a number of factors which affect a woman's choice. I agree that other factors exist apart from advertising. Of course, there is too much unsuitable promotion of the role of the female breast as a secondary sexual organ, which makes it difficult for many women and their partners to relate to the breast in its other important role. I do not deny that women's breasts can and do give considerable pleasure to both sexes, but is it not a reflection of our society's strange attitudes that the naked female breast, portrayed in a manner which objectifies women as commodities for male gratification, is regarded as an acceptable daily sight on the top and bottom shelves of our local newsagent's shop whereas a mother who discreetly breast-feeds her baby in a public place is frowned upon and made to feel that she is somehow behaving indecently?

Sir Teddy Taylor: Hon. Members should appreciate the content of the regulations. The hon. Lady speaks with great sincerity, but is she aware that if she or any of her colleagues sought to publish an article in a newspaper which did not state the benefits and superiority of breast-feeding they could be subject to a substantial fine under regulation 22? I am sure that everyone, like me, is interested in what she has to say. Does she not regard this as the most monstrous example of silly bureaucracy that the European Community has ever produced?

Dr. Jones: I think that anyone interested in this debate will regard that issue as a red herring when it comes to considering the needs of women and babies and the need to encourage breast-feeding. In fact, the EC directive gives considerable freedom to this country as to how to regulate such matters and, of course, the Government have already made clear their support for the World Health Organisation's code, which is perhaps more stringent.
I was referring to the attitudes which persist in society. I believe that they have a great deal to do with what amounts to considerable consumer resistance to breast-feeding, even though the Government—[Interruption.]

Mr. Deputy Speaker (Mr. Michael Morris): Order, apologise to the hon. Lady and would be most grateful if hon. Members on the fourth Bench would hold their conversations elsewhere.

Dr. Jones: I was talking about the consumer resistance which persists despite all the expert opinion to the effect that breast-feeding is the ideal method for feeding babies. It is in this respect that advertising is of such crucial importance, as has long been recognised in the World Health Organisation code, which stipulates that there should be no advertising to the general public of formula or other products within the scope of the code. It is a much stricter code than that in the EC directive.
The code allows dissemination of information to health care professionals but, unfortunately, in the voluntary code operated by baby milk manufacturers since the World Health Organisation code was established, it has been interpreted as allowing the advertising of infant formula milks to mothers in publications distributed through the health care system. That is just at the point when mothers are most vulnerable, and it goes completely

against the WHO code which states that no facilities in the health care system should be used for the purposes of promoting infant formula.
Baby milk companies spend anything between £5 million and £12 million a year on advertising—saturating hospitals and clinics with booklets, videos and leaflets, which pretend to promote breast-feeding while using subtle messages to undermine it. They always include the statement that breast-feeding is best, but the very juxtaposition of this information with the brand name implies that the particular product is just as good. A poster that I saw recently in my GP's surgery illustrates that point well. The logo of the company responsible for the poster was prominently displayed next to a picture of a mother breast-feeding her baby.
Interestingly, the information given by the baby milk manufacturers fails to identify the actual ingredients of the formula: cows' milk which may be supplemented with beef fat, maize oil, chicken egg or large amounts of glucose syrup. The information given is selective and creates the impression that breast-feeding is difficult and that artificial feeding presents few risks. These conflicting messages undermine women's confidence in their ability to feed their own babies.
In December 1993, it seemed that this would soon become a thing of the past when the Government, as we have heard, issued draft proposals for the implementation of the EC directive which would have banned baby pictures from tins, the advertising of infant formula to the public and the issue of free samples. The role of ensuring that all mothers received unbiased information and were given the help and advice that they needed in order to make informed choices would have been the responsibility of trained health care workers, not commercial marketing. Unfortunately, despite support for the proposals from major health bodies such as the British Medical Association and the Royal College of Midwives, as well as the National Consumer Council and, in fact, some calls to strengthen the proposals to include follow-on formulae, the Government decided to put commercial interests before infant health.

Mr. Walter Sweeney: Is it not clear from the directive that advertisers are required to indicate that breast-feeding is best?

Dr. Jones: Obviously, the hon. Gentleman was not here when I was talking about the nature of the advertising and the way in which that slogan is used to undermine breast-feeding rather than to promote it.
If Britain is to get anywhere near achieving the Government's targets on breast-feeding in the White Paper, "The Health of the Nation", we shall have to learn from the experience of countries such as Norway. There is no promotion of baby milk in Norway. Since 1970, when breast-feeding rates there were similar to those in the United Kingdom—[HoN. MEMBERS: "He is going now."] That shows the interest that the hon. Member for Vale of Glamorgan (Mr. Sweeney) has in the matter.
Since 1970, the Norwegian Government have had a strong policy of support for breast-feeding. All mothers have access to a mother-support network. That is to be compared with the attitude of our Government: in response to a question that I tabled in July asking what advice is given to employers about arrangements for encouraging mothers to continue breast-feeding after their


return to work, the Government—both the Department of Health and the Department of Employment—unashamedly answered, "None."
If the Government are really serious in their stated support for breast-feeding, they should properly implement the WHO code and do more to promote breast-feeding through the health care system. Spending 20p per mother—compared with at least £6 per mother spent by baby milk manufacturers to promote their £119 million business—simply is not good enough.

Mr. David Faber: I am delighted to make what I hope will be a brief speech. I listened very carefully to the speech of the hon. Member for Clwyd, South-West (Mr. Jones) but I did not feel that his heart was in it. Having prayed against the regulations, it is ironic that only one Labour Back Bencher is here to support her Front-Bench team. There probably would have been more debate if the regulations had been debated upstairs.
The speeches of the hon. Members for Clwyd, South-West and for Birmingham, Selly Oak (Dr. Jones) contained a true sign of some of the thoughts of new Labour and of the Labour party. We have heard that they are anti-business, that they are anti-choice, and in condemning the fact that some European companies own companies here in Britain, we have seen that they are anti-EC investment in this country. I shall not follow the hon. Member for Selly Oak down the path that she took. I found some of what she said quite incomprehensible.
I am delighted to declare a constituency interest as Cow and Gate Ltd. has its headquarters in Trowbridge in my constituency—[Interruption] I am proud to do so. The hon. Member for Selly Oak, in an intervention in the Adjournment debate of the hon. and learned Member for Montgomery (Mr. Carlile) a couple of weeks ago, seemed in some way to question the fact that it was right for me to have introduced an Adjournment debate a year ago when I had a constituency interest in Cow and Gate. I should have thought that that is exactly what we are here for in the House of Commons—to represent businesses in our constituencies and to speak up for them and their interests. On this occasion, happily, the interests of my constituents and my own beliefs coincide, which of course does not always happen.
Cow and Gate has a long tradition, as my hon. Friend the Minister pointed out. I am happy to admit to being a Cow and Gate baby, as, indeed, did the hon. and learned Member for Montgomery in his Adjournment debate. The House may remember that the Minister who responded to the Adjournment debate that I secured a year ago was my hon. Friend the Member for Crawley (Mr. Soames), my hon. Friend the Minister's predecessor. We had some trouble in ascertaining that evening whether he was a Cow and Gate baby. However, I notice that The Daily Telegraph today reports that he is due to start a crash diet, and I am sure that Cow and Gate will be able to come up with a suitable recipe to help him.
As the House knows, since 1983 the rules governing the marketing of baby milk have been enshrined in the voluntary code of practice, which will in effect be formalised this evening by the regulations. However, as the Minister has said, in some respects the EC directive being implemented does not go as far as the voluntary

code, and baby milk advertising will continue to be allowed, but only in publications distributed through health care professionals and in trade journals.
For the past 12 years the voluntary code has been monitored by an independent committee, most of whose members are wholly independent from the infant formula industry. The committee considers complaints against the code, which historically and traditionally have come from pressure groups, not from the general public. Few of those complaints have been upheld.
Baby milk manufacturers have taken independent steps over the years to control their marketing—the most obvious being the banning of free and subsidised supplies to the health service some years ago.
Both inside and outside the House, much has been made of the World Health Organisation code, which, as the Minister has confirmed, Britain fully supports. The code rightly seeks to promote breast-feeding as the ideal means of feeding babies, but we all know that we do not live in an ideal world. Contrary to what the hon. Member for Selly Oak says, many mothers simply cannot breast-feed, or do not wish to do so. Ironically, it is often the infant formula manufacturers that provide most of the information that is available about breast-feeding.
Parents can obtain information about breast-feeding and all the other forms of baby feeding from a variety of sources—from health professionals, from the Government, from specialist organisations and, of course, from the manufacturers. All those sources have an important role to play, and the manufacturers provide a service to health professionals and to mothers through the distribution of leaflets and through sponsorship, training and advertising, as well as by other means.
Manufacturers promote not only breast-feeding but their own products. In all, the industry hands out about 5 million leaflets a year to about 800,000 mothers. Had the draft regulations, which I opposed this time last year, been accepted, that source of information for mothers would have disappeared altogether.
Since 1983, when the voluntary code was introduced—here I disagree with the hon. and learned Member for Montgomery and with other Opposition Members—the breast-feeding rate has remained static, at about 65 per cent. How, then, can it possibly be said that the maintenance of the status quo has resulted in a drop in breast-feeding rates?
The difference between the new EC directive being implemented tonight and the WHO code of conduct is, of course, that by law the Government have to implement the directive. At a time when all Departments, especially the Ministry of Agriculture, Fisheries and Food, were seeking to deregulate, we were faced with the prospect of the United Kingdom implementing a directive and going even further.
Given my past interest, I am pleased that the Government have pulled back from that intention. As has already been said, article 8 of the EC directive, which deals with advertising, says:
advertising of infant formulae shall be restricted to publications specialising in baby care and scientific publications. Member states may further restrict or prohibit such advertising.
Article 8 thus allows for advertising not only in specialised baby care publications, such as Bounty books distributed within the health care system, but in baby care


and parenting magazines, such as Mother and Baby and Practical Parenting, which are readily available on general sale in newsagents.

Dr. Lynne Jones: The hon. Gentleman has correctly said that member states may further restrict or prohibit such advertising. Does he not accept that if we implemented the WHO code that is exactly what we would be doing? Does he support the code or not?

Mr. Faber: As the Minister has said, we as a Government support the code. However, I have said precisely why I support what the Government are doing: I do not wish to see over-regulation, least of all in the Ministry of Agriculture, Fisheries and Food.
I was about to draw the attention of the House to regulation 17, which says that
No person shall publish or display any advertisement for an infant formula … except … in a publication specialising in baby care and distributed only through the health care system".
That clearly prohibits the more general advertising that would have been allowed under article 8, which other hon. Members—some of whom may feel that the regulations are too restrictive—and manufacturers would oppose.
Finally, a great deal has been made of the organisations that are opposed to advertising baby milk and of the representations that they have made to my hon. Friend the Minister. I disagree with the hon. Member for Clwyd, South-West, who questions the validity of an independent survey carried out for Bounty. He is right that Bounty may not be independent, but the company which carried out the survey—Market Trends—is independent. [Laughter.] The hon. Gentleman may laugh, but is he saying that when MORI carries out a poll for the Labour party he would question whether MORI was an independent polling organisation because the Labour party had an interest in the result of that poll? He could not possibly say that.
The independent survey was quite categoric, and showed that 93 per cent. of bottle-feeding mothers opposed a ban on advertising, as did 74 per cent. of breast-feeding mothers, 68 per cent. of midwives and 64 per cent. of health visitors. As has been pointed out, the latter two groups are made up of professionals who would vet whether such material was suitable for distribution. Those experienced professionals, in my opinion, should be listened to.
It has been alleged that the industry spends some £12 million a year on promotional materials, but I do not believe that. I know what Cow and Gate's market share is, and how much it has spent to support that market share. Either it is infinitely more competitive than its competitors, or the true figure is much lower—perhaps less than half that figure. Of that expenditure, more than 40 per cent. goes on educational material.
The debate has been about freedom of choice and the right of a mother—who, whatever others may think, knows best—to choose what to do for her baby. The Government rightly acknowledge that breast is best, and we will do everything possible to promote that. Bottle-feeding is not dangerous—it is a matter of the degree of goodness for the baby. While cigarettes can still be freely advertised it would be ludicrous to ban the limited advertising of a legal and healthy product such as baby milk.
It would be insulting to mothers and to their intelligence to say that they cannot make a rational decision. [Interruption.] I hope that Opposition Front Benchers are paying attention.

Mr. Martyn Jones: I am not intervening just to prove that I am paying attention; I should like to make two points. First, my speech was not in any way diffident—this is an important issue, and I am very sincere about what I am saying—and, secondly, the hon. Gentleman said that baby milk is not harmful. Does he not consider a 10-times higher risk of gastroenteritis to be harmful?

Mr. Faber: Anyone would prefer babies not to have gastroenteritis, but I go back to what I said a few minutes ago. Contrary to what the hon. Member for Selly Oak said, many mothers are physically unable to breast-feed, and many do not do so for other reasons. It would be quite wrong to deprive them of the right to choose and the information that is available.
Since her well-deserved promotion, my hon. Friend the Minister has been an eloquent proponent of minimum interference mixed with plenty of good common sense. That is what we have in the regulations this evening, and I commend her on laying them before the House.

Mr. Alex Carlile: The hon. Member for Westbury (Mr. Faber) has represented his constituency interest well tonight. One could almost hear echoes of his distinguished grandfather as he told us that babies, apparently, have never had it so good.
I was lucky enough to have an Adjournment debate on 22 March to which the Minister replied. During that debate, I told the House that I was a Cow and Gate baby. Incidentally, I was born on the same day as the Minister of State for the Armed Forces, who ate for both of us. The Minister told us during that debate that she was a mother-in-law. During her percussive reply to the debate—in which she showed a degree of petulance which, I suspect, she would not display in her relations with her offspring and offspring-in-law—she seemed to claim that those of us who criticised the Government for the regulations were somehow treating women as unintelligent creatures who were not able to make their own choice.
I too have a mother-in-law. Like the Minister, she is extremely charming, highly intelligent and very experienced and I have nothing but praise for her, even after more than a quarter of a century. I am afraid that, as an intelligent and wise woman, she would not agree for one moment with the hon. Lady.
As the hon. Member for Westbury said, in this country we have a breast-feeding rate of about 65 per cent. That is a great deal less than in some other countries, which have been much more successful in persuading mothers to breast-feed. I hope that the Minister will agree that the success of those countries is to be commended and that one should try to learn from it and to find out why, for example, there is a much higher breast-feeding rate in Norway. Is it because women in Norway are better at exercising choice? I doubt it. It is far more likely to be because the Norwegian Government have taken much more seriously the World Health Organisation's code and have enacted it.
During this debate, an unseemly war of words broke out on the fourth row back below the Gangway on the Government side between the right hon. Member for Westmorland and Lonsdale (Mr. Jopling) and the hon. Member for Southend, East (Sir T. Taylor), who were separated only by a nervous-looking referee. For this to be an argument about European regulations begs the question as to what level of action the Government should take.
The hon. Member for Birmingham, Selly Oak (Dr. Jones) is right—the Government should be doing more to enable women to make that informed choice, which I, like the Minister, believe they can make. Unlike the Minister, however, I suspect that they are being influenced in the opposite direction.

Mrs. Browning: I do not want to hold up the hon. and learned Gentleman, but he will recall that in his Adjournment debate I asked him whether he felt that he knew better than the mothers of this country—it is on the record—and he replied, "I do."

Mr. Carlile: It is clear from the evidence that many mothers in this country who might be persuaded to breast-feed are being persuaded to bottle-feed. That is the issue. The answer that I gave to that question is reflected in the answers that are given by people who are much more expert than me.
I do not want to take up much time, as I had my opportunity to speak on the issue on 22 March and I will certainly not repeat what I said then, but may I remind the Minister that there have been extremely telling articles in a number of distinguished medical journals, which demonstrated through proper scientific protocols that breast-feeding gives remarkably important protection to babies? They are journals such as The Lancet, the British Medical Journal, the International Journal of Epidemiology, the "Journal of Paediatrics", the "American Journal of Epidemiology", the "New Zealand Medical Journal", the Journal of Clinical Epidemiologyand—probably the most distinguished medical journal of all—The New England Journal of Medicine.
The article inThe New England Journal of Medicine was published in 1988 and written by Mayer and others. It demonstrated that the risk of the onset of diabetes is significantly reduced by breast-feeding. Diabetes is just one of the conditions to which the journals refer—others are breast cancer, respiratory infections and sudden infant death syndrome. Surely the Government should have done more than the minimum to reduce the incidence of that sort of damage and of those conditions.
Will the Minister answer one question that she did not answer in the Adjournment debate? Having drafted regulations that were considerably tougher than those that have been introduced, why did the Government change and dilute them? Although it would be cynical, the obvious answer—I am content to set it aside if she can give us a better answer—is that the Government were giving way to a large and significant lobby from the food industry.
The minimal regulations that have been introduced have taken matters not a jot further. The Minister has told us frankly that the regulations that were introduced simply put the voluntary scheme into statutory form. Is she proud of taking a step that is barely a step? Surely she should have gone further and taken some steps at least to the extent of the original draft regulations, which still fall

short of the World Health Organisation code. That might have ensured better health for more babies through better health education for more young mothers.

Mr. Michael Shersby: I believe that breast-feeding is best, but, like other hon. Members, I know that it is not always possible for mothers to breast-feed in what is a less than perfect world. I strongly support what my hon. Friend the Parliamentary Secretary, the hon. Member for Tiverton (Mrs. Browning), said in her sensible and down-to-earth speech. I oppose the motion because it would place an unreasonable restriction on the advertising of infant and follow-on formulae. It would restrict the freedom of choice to which every mother is entitled.
I declare that I have a constituency interest inasmuch as Milupa Ltd. is located in my constituency, but I have no personal or financial interest in that firm. It is simply an important local employer in Uxbridge.
We heard this evening that the proportion of mothers who breast-feed to mothers who bottle-feed has hardly changed in the past 10 to 15 years, despite changes in marketing practice. No Government or commercial evidence exists to suggest that advertising has a significant influence on a mother's choice of feeding method. I know that a number of factors affect a mother's choice, as I have been married for 37 years and have a family of my own; I have therefore been able to observe some of those matters at first hand.
First, it is matter of personal preference. Many women prefer to feed their babies with infant formula rather than breast-feed them. Family and social pressures may cause a woman to make that decision. The advice that many women receive from health professionals may also lead to that decision.
The most recent Government survey gave the reasons why mothers choose not to breast-feed. First, 39 per cent. of all mothers and 47 per cent. of all first-time mothers said that they chose to use infant formula—bottle-feed—because it allowed other people to feed the baby. Secondly, there is the well-known and obviously acceptable reason that a mother has insufficient natural milk to feed her baby. Many mothers suffer physical discomfort, and some babies reject breast-feeding. Another reason is that of life style. We live in a society where the vast majority of mothers go out to work and therefore choose, by their own free will, to bottle-feed instead of breast-feed their babies.

Dr. Lynne Jones: Will the hon. Gentleman give way?

Mr. Shersby: No. The hon. Lady has had quite long enough tonight. I am under great pressure from my colleagues to be brief.
Some 39 per cent. of all mothers and 47 per cent. of first-time mothers quoted previous experience as a factor.
My hon. Friend the Member for Westbury (Mr. Faber) referred to the research by Market Trends Ltd. carried out in 1994. That research is persuasive because it shows that mothers want a ban on neither infant formula nor advertising, and that view is shared by a wide variety of health professionals. That survey found that 60 per cent. of health professionals were opposed to a ban. That figure included 68 per cent. of midwives and 64 per cent. Of


health visitors. Those professionals are constantly concerned with the care of mothers and babies, and their views must be taken seriously.
I submit that there is a need for advertising. It is an essential communications channel for all those involved in the food chain, such as manufacturers, retailers, distributors, health professionals and consumers. Advertising provides information about products, such as details of changes to packaging, formulations and product names. At least 100 changes are made to infant formula every year.
Mothers need to be confident that the products that they are buying are safe and of a high standard. Advertising identifies the brands to parents so that they can distinguish easily between different products. It is well known that branding provides a guarantee of safety and nutritional quality backed by a reputable company name. Those are important factors that any mother—or father, for that matter—would wish to take into account in taking what is essentially a personal decision.
Advertising also provides the mother with protection against the use of inappropriate products. It ensures healthy competition between manufacturers, which in turn ensures that product innovation has progressed considerably, which increases product choice.
Those are the principal reasons why I oppose the motion. There is a terrible tendency among some Members of the House to tell mothers what is best for them, a tendency to dictate what people should eat and drink, a tendency to quote from one world organisation or another. The fact is that the British do not like it. The British want a sensible regime of the type described so wisely by my hon. Friend the Parliamentary Secretary in her admirable speech. I therefore strongly oppose the motion, and I shall vote against it in the Lobby.

Mr. Cynog Dafis: This is a terribly serious issue—in many instances, literally a life or death issue. It is a simple issue. It cannot be right to allow the advertising of infant formula and follow-on feeds in the national health service. Common sense tells me that that cannot be right.
Two things are evident. First, mother's milk is beneficial to babies. It follows that it is detrimental to babies not to have mother's milk. That is as true of human beings as it is of any other species. Anyone who has reared animals knows the effect of not allowing the young to have their mother's milk.
Secondly, it is evident that advertising influences behaviour. We have heard two speakers from the Conservative Benches who have had to admit that in their constituencies are commercial interests whose interests they have been, to some degree, representing. The hon. Member for Uxbridge (Mr. Shersby) mentioned Milupa. It is worth mentioning that Milupa sponsored a hearing room in Hillingdon hospital—a room that is used by expectant mothers—and, following the exhibition of the word "Milupa" above the entrance to the hall, sales of Milupa milk increased there by 560 per cent. Obviously, advertising has that effect.
Bearing those two facts in mind, it is not surprising that people who know and understand the importance of mother's milk to children's health want to prohibit advertising of infant formula feed in the national health service. We have heard that 48 agencies, including the United Nations Children's Fund, the British Medical Association, the Royal College of Nursing and the Royal College of Midwives, wished the regulations to have that effect.
It is not surprising that that is the case, and it is not surprising that the baby food industry wants promotion and advertising to continue. Of course it does; it is in its interest.
To whom should we listen—the baby food industry or the health professionals? The answer is self-evident. My next question is rather sad: to whom is the Government more likely to listen—the health professionals or the food industry? I am afraid that the answer to that is self-evident. That is why it has become self-evident to right-thinking people that it is time for the Government to fall—[Laughter.] It is because of just that sort of thing. Conservative Members find that amusing, but we should consider the public's perception of the Government's line on the subject. I think that the Government's line will be regarded with repugnance, but without surprise, by the British public.
I wish to say something on the basis of personal experience. My children were not breast-fed, for reasons that I have discussed with my wife. She experienced some initial difficulty and in hospital she was discouraged from continuing to breast-feed after her first attempt. She admits that she was influenced by the promotional activities of the powdered milk manufacturers.
I have three children. When he was younger, the eldest suffered badly from migraine. The other two children both suffer from asthma. It is well known that those conditions are likely to be exacerbated if the baby was not breast-fed and did not have the advantage of such food. I do not think that many people would question that. It is highly likely that my children would have had better health, and my two younger children would have better health now, had it not been for the influence of the baby food manufacturers on my wife's decision. My wife recognises that.
My wife is a highly intelligent woman, but she concedes that at the time she was young, inexperienced and vulnerable in her immediate post-natal condition, and was influenced by the promotional activity. How much greater will be the influence on other mothers? It is evident that thousands of mothers will be influenced in that way. It cannot be right to allow that influence to be brought to bear on mothers in those circumstances when the crucial choice as to whether they will breast-feed is made.
The line peddled by the Parliamentary Secretary is unworthy of her. I shall support the revocation of the regulations, and so should she.

Mr. Andrew Rowe: I declare an interest in that my wife works at the centre for international child health, the research arm of Great Ormond Street hospital and a worldwide centre of excellence in the care of children.
The unanimous view of specialists at the centre for international child health is that the unnecessary use of formula feed is expensive, damaging to children and harmful to mothers. That view is based on experience from all over the world, including many countries where the activities of formula feed salespeople are harmful.
The Government have put a number of health professionals in an extraordinarily difficult position because they have set targets or suggested goals for the promotion of the best health care while at the same time frustrating the professionals in a variety of different ways.
It is important for me briefly to set out some of those frustrations. If the Government are determined to improve the promotion of breast-feeding, why are they so content with such poor performance relative to most countries in Europe? We know that they are in favour of it, because they state in the White Paper "The Health of the Nation":
the Government proposes to set up a national working group to help identify and take forward action to increase the proportion of infants breastfed both at birth and at six weeks.
I hope that my hon. Friend the Parliamentary Secretary will say what that group has achieved. I thought that she said in her opening remarks that, if we hang about for a few more weeks, as a result of its hard work there will be a new code. That seems a fairly minor achievement after three years of unremitting toil.
I did not understand why, if Ministers are confident that their promotion of breast-feeding is as effective as commercial promotion, in booklets and videos distributed throughout the health system—which is bound to be the most effective way of reaching the target audience—one of my hon. Friends said that there was some merit in confining advertising to specialist health journals. It seems improbable that there would be very much response to advertising in a motor cycling magazine, for example.
Specialists all over the world agree that breast-feeding is better for babies, better for mothers, much less expensive than bottle milk and proprietary feeds and, therefore, better for the all-round prosperity of low-income families; yet here in the United Kingdom, we seem determined to sustain the promotional efforts of companies whose commercial advantage must be to depress as far as possible the levels of breast-feeding. That makes very little sense.
The Government's problem will become more acute as they move into health promotion rather than simply curative medicine. Governments are mostly very poor at advertising effectively; it is particularly difficult for a Conservative Government, because Conservative Governments are always concerned lest the weight of taxpayers' money behind a Government promotional scheme should be seen as unfair competition to private sector advertising campaigns. Consequently, Governments feel paralysed and do not promote their cause with anything like the vigour of the people promoting the alternative cause.
If the Government are serious about promoting breast-feeding, they have to improve their performance a great deal more than they have done so far, and the almost unanimous voice of international specialists should be more influential. I hope that my hon. Friend the Parliamentary Secretary will understand the considerable frustration of the professionals who, on the one hand, are encouraged to promote the best of health and, on the other, are faced with an almost impossible position.

Sir Teddy Taylor: Views have been expressed that breast-feeding is a good idea, and that the absence of it causes migraine—which surprises those who get migraines for other reasons. Others have expressed the view strongly that it is ridiculous to interfere with the freedom of mothers and commercial companies.
I hope that, before hon. Members vote on the motion, they will read the regulations, particularly regulations 21 and 22. Hon. Members must first appreciate that we are not voting on some magic idea of whether breast-feeding is a good or a bad idea. All we are doing is implementing a European regulation which has already been passed. People who speak those rather ridiculous, sentimental words and say that it is of great moment should admit to the world that we are merely implementing legislation that Europe has applied already.
There is also the question of the Euro-thought police. In this country, we accept that people should be able to argue for or against something. They may argue with great sincerity that breast-feeding is a great idea or that it is not such a good thing. Regulation 21 says:
No person"—
not me or any other hon. Member or any member of the public—
shall produce or publish any informational and educational … material
that is aimed at mothers—mothers read most relevant information—which does not promote
the benefits and superiority of breast-feeding".
If academics, doctors or social workers think that that may be wrong, not only are they not allowed to publish their views but they could be fined under regulation 22.
Hon. Members who intend to vote for the regulations because they think that they are good and that it is exciting to do so should appreciate that they are voting in favour of interfering with people's liberty to discuss issues and to publish their views. The Parliamentary Secretary may say that that is rubbish, and that the regulations are aimed at commercial companies.
There are restrictions on the donations that commercial companies can make. They can make donations only with the written authority of the Secretary of State or in accordance with guidelines that she has drawn up. Commercial companies—the Cow and Gates of this world—are not allowed to make donations to anyone unless they make them subject to the rules drawn up by the Secretary of State under the European directive.
Finally, what the blazes is the point of having silly rules which were drawn up by a European directive? They restrict our freedoms. The House may take a wholly different view; hon. Members may think that these sorts of issues should be discussed and written about in newspapers and magazines for mothers with infants, and that we should examine all aspects of the issue. Our freedom of speech is being restricted and undermined. That is not funny. It is making nonsense of our democracy, nonsense of the House of Commons and nonsense of our debate.
The hon. Member for Hayes and Harlington (Mr. Dicks) may yawn, but it is not funny. We are witnessing the death of democracy, and that matters. After the hon. Member has had a yawn, I ask him to read the document. If he does not, I hope that other hon. Members will.

Sir Giles Shaw: I shall make some brief observations on the subject. First, I am glad to follow my hon. Friend the Member for Southend, East (Sir T. Taylor) in speaking in the debate. I understand that it would be a desperate situation if we all had to feed at the Euro-breast; that is something that we must avoid.
There is considerable confusion as to whether, by taking the voluntary system into a statutory form, there is any significant difference in the Government's policy on promoting infant formula products. If the Parliamentary Secretary can assure me that there will be no change from the proposals that were published originally, which had the blessing of the World Health Organisation and which tried to prevent persuasion being applied to those who are perhaps less able to understand and accept the arguments, I shall be satisfied. However, I believe that there have been changes, and representations have been made to me expressing great anxiety that what is now proposed runs counter to the original proposals, and the reasons for that have not been made clear.

Mrs. Browning: With the leave of the House, Mr. Deputy Speaker, my remarks on the motion will be very brief. I am grateful to the Opposition for their generosity. Despite my reassurances to the contrary, a feeling has developed during tonight's debate that somehow the Government are anti-breast-feeding. I agree with everything that has been said about the benefits of breast-feeding. The hon. and learned Member for Montgomery (Mr. Carlile) mentioned those benefits and I assure him that I do not disagree for one minute with what he said. [Interruption.] Yes, he was bottle-fed.
I understand the great strength of feeling that this issue generates, but let me reassure the House that the Government remain committed to the promotion and the protection of breast-feeding as the best means of nurturing a baby. I remain convinced that mothers have the intelligence to decide for themselves what is best for their baby. If they cannot breast-feed or there comes a time when the baby moves from breast-feeding to bottle-feeding, it is important that mothers have informed choices. It is quite appropriate that the information should be given to them by the health care professionals to whom the information is disseminated.
I repeat the central point, and perhaps my hon. Friend the Member for Southend, East (Sir T. Taylor) will note this: the controls on advertising that are laid down in the regulations are just the same as those that we have had for the past 12 years under our voluntary code. There has been no relaxation in the measures. The essential change is that, with the regulations, there will be statutory backing for those controls, and without them there will not. Those who are concerned about breast-feeding should welcome that change.
I commend the regulations to the House.

Question put:—

The House divided: Ayes 233, Noes 258.

Divisoin No.128]
[10.05 pm


AYES


Abbott, Ms Diane
Feid, Frank (Birkenhead)


Adams, Mrs Irene
Fisher, Mark


Ainger, Nick
Flynn, Paul


Ainsworth, Robert (Cov'try NE)
Foster, Rt Hon Derek


Allen, Graham
Foster, Don (Bath)


Alton, David
Fraser, John


Anderson, Donald (Swansea E)
Galbraith, Sam


Anderson, Ms Janet (Ros'dale)
Gapes, Mike


Armstrong, Hilary
Garret, John


Ashton, Joe
George, Bruce


Austin-Walker, John
Gerrard, Neil


Banks, Tony (Newham NW)
Gilbert, Rt Hon Dr John


Barron, Kevin
Godman, Dr Norman A


Battle, John
Godsiff, Roger


Bayley, Hugh
Golding, Mrs Llin


Beckett, Rt Hon Margaret
Gordon, Mildred


Beggs, Roy
Grant, Bernie (Tottenham)


Bell, Stuart
Griffiths, Nigel (Edinburgh S)


Benn, Rt Hon Tony
Griffiths, Win (Bridgend)


Bennett, Andrew F
Grocott, Bruce


Benton, Joe
Gunnell, John


Bermingham, Gerald
Hain, Peter


Berry, Roger
Hall, Mike


Betts, Clive
Hanson, David


Blunkett, David
Hardy, Peter


Boateng, Paul
Harman, Ms Harriet


Bradley, Keith
Harvey, Nick


Bray, Dr Jeremy
Hattersley, Rt Hon Roy


Brown, Gordon (Dunfermline E)
Henderson, Doug


Brown, N (N'c'tle upon Tyne E)
Heppell, John


Burden, Richard
Hill, Keith (Streatham)


Byers, Stephen
Hinchliffe, David


Campbell, Mrs Anne (C'bridge)
Hodge, Margaret


Campbell-Savours, D N
Hoey, Kate


Canavan, Dennis
Home Robertson, John


Carlile, Alexander (Montgomery)
Hoon, Geoffrey


Chidgey, David
Howarth, George (Knowsley North)


Chisholm, Malcolm
Howells, Dr. Kim (Pontypridd)


Church, Judith
Hughes, Robert (Aberdeen N)


Clapham, Michael
Hutton, John


Clark, Dr David (South Shields)
Illsley, Eric


Clarke, Eric (Midlothian)
Ingram, Adam


Clarke, Tom (Monklands W)
Jackson, Glenda (H'stead)


Clelland, David
Jackson, Helen (Shef'ld, H)


Clwyd, Mrs Ann
Jamieson, David


Coffey, Ann
Jones, Barry (Alyn and D'side)


Cook, Frank (Stockton N)
Jones, leuan Wyn (Ynys Mon)


Cook, Robin (Livingston)
Jones, Jon Owen (Cardiff C)


Corbett, Robin
Jones, Lynne (B'ham S O)


Corbyn, Jeremy
Jones, Martyn (Clwyd, SW)


Corston, Jean
Jowell, Tessa


Cousins, Jim
Kaufman, Rt Hon Gerald


Cummings, John
Keen, Alan


Cunliffe, Lawrence
Kennedy, Jane (Lpool Brdgn)


Cunningham, Jim (Covy SE)
Khabra, Piara S


Dafis, Cynog
Kilfoyle, Peter


Darling, Alistair
Lestor, Joan (Eccles)


Davidson, Ian
Lewis, Terry


Davies, Bryan (Oldham C'tral)
Liddell, Mrs Helen


Davies, Ron (Caerphilly)
Litherland, Robert


Denham, John
Lloyd, Tony (Stretford)


Dewar, Donald
Llwyd, Elfyn


Dixon, Don
Loyden, Eddie


Dobson, Frank
Lynne, Ms Liz


Donohoe, Brian H
McAvoy, Thomas


Dowd, Jim
McCartney, Ian


Dunwoody, Mrs Gwyneth
Macdonald, Calum


Eagle, Ms Angela
Mackinlay, Andrew


Eastham, Ken
Maclennan, Robert


Etherington, Bill
McMaster, Gordon


Ewing, Mrs Margaret
McNamara, Kevin


Fatchett, Derek
MacShane, Denis






McWilliam, John
Robinson, Geoffrey (Co'try NW)


Madden, Max
Rogers, Allan


Maddock, Diana
Rooker, Jeff


Mahon, Alice
Rooney, Terry


Marek, Dr John
Ross, Ernie (Dundee W)


Marshall, David (Shettleston)
Sedgemore, Brian


Marshall, Jim (Leicester, S)
Sheerman, Barry


Martlew, Eric
Sheldon, Rt Hon Robert


Maxton, John
Short, Clare


Meacher, Michael
Simpson, Alan


Meale, Alan
Skinner, Dennis


Michael, Alun
Smith, Andrew (Oxford E)


Michie, Bill (Sheffield Heeley)
Smith, Chris (Isl'ton S & F'sbury)


Milbum, Alan
Smith, Llew (Blaenau Gwent)


Miller, Andrew
Snape, Peter


Mitchell, Austin (Gt Grimsby)
Soley,Clive


Moonie, Dr Lewis
Steel, Rt Hon Sir David


Morgan, Rhodri
Steinberg, Gerry


Morley, Elliot
Stevenson, George


Morris, Rt Hon Alfred (Wy'nshawe)
Stott, Roger


Morris, Estelle (B'ham Yardley)
Strang, Dr. Gavin


Morris, Rt Hon John (Aberavon)
Sutcliffe, Gerry


Mudie, George
Taylor, Mrs Ann (Dewsbury)


Mullin, Chris
Taylor, Rt Hon John D (Strgfd)


Murphy, Paul
Timms, Stephen


O'Brien, Mike (N W'kshire)
Tipping, Paddy


O'Brien, William (Normanton)
Touhig, Don


O'Hara, Edward
Turner, Dennis


Olner, Bill
Tyler, Paul



Vaz, Keith


Orme, Rt Hon Stanley
Walker, Rt Hon Sir Harold


Parry, Robert
Walley, Joan


Pearson, Ian
Wardell, Gareth (Gower)


Pendry, Tom
Wareing, Robert N


Pickthall, Colin
Watson, Mike


Pike, Peter L
Wicks, Malcolm


Pope, Greg
Wigley, Dafydd


Powell, Ray (Ogmore)
Wilson, Brian


Prentice, Gordon (Pendle)
Winnick, David


Primarolo, Dawn
Wise, Audrey


Purchase, Ken
Worthington, Tony


Quin, Ms Joyce
Wray, Jimmy


Radice, Giles
Young, David (Bolton SE)


Randall, Stuart



Raynsford, Nick
Tellers for the Ayes:


Redmond, Martin
Mrs. Barbara Roche and


Rendel, David
Mr. Peter Mandelson.




NOES


Ainsworth, Peter (East Surrey)
Bottomley, Rt Hon Virginia


Aitken, Rt Hon Jonathan
Bowden, Sir Andrew


Alexander, Richard
Bowis, John


Alison, Rt Hon Michael (Selby)
Boyson, Rt Hon Sir Rhodes


Allason, Rupert (Torbay)
Brandreth, Gyles


Amess, David
Brazier, Julian


Ancram, Michael
Bright, Sir Graham


Arbuthnot, James
Brooke, Rt Hon Peter


Arnold, Jacques (Gravesham)
Brown, M (Brigg & Ct'thorpes)


Arnold, Sir Thomas (Hazel Grv)
Browning, Mrs Angela


Ashby, David
Bruce, Ian (Dorset)


Atkins, Robert
Budgen, Nicholas


Atkinson, David (Bour'mouth E)
Burt, Alistair


Atkinson, Peter (Hexham)
Butcher, John


Baker, Nicholas (North Dorset)
Butler, Peter


Baldry, Tony
Carlisle, John (Luton North)


Banks, Matthew (Southport)
Carlisle, Sir Kenneth (Lincoln)


Banks, Robert (Harrogate)
Carrington, Matthew


Bates, Michael
Cash, William


Batiste, Spencer
Channon, Rt Hon Paul


Bellingham, Henry
Chapman, Sydney


Bendall, Vivian
Clappison, James


Beresford, Sir Paul
Clark, Dr Michael (Rochford)


Biffen, Rt Hon John
Clarke, Rt Hon Kenneth (Ru'clif)


Bonsor, Sir Nicholas
Clifton-Brown, Geoffrey


Booth, Hartley
Coe, Sebastian


Boswell, Tim
Colvin, Michael





Congdon, David
Hunter, Andrew


Conway, Derek
Jack, Michael


Coombs, Anthony (Wyre For'st)
Jenkin, Bernard


Coombs, Simon (Swindon)
Jessel, Toby


Cope, Rt Hon Sir John
Johnson Smith, Sir Geoffrey


Cormack, Sir Patrick
Jones, Gwilym (Cardiff N)


Couchman, James
Jones, Robert B (W Hertfdshr)


Cran, James
Jopling, Rt Hon Michael


Currie, Mrs Edwina (S D'by'ire)
Kellett-Bowman, Dame Elaine


Curry, David (Skipton & Ripon)
Key, Robert


Davies, Quentin (Stamford)
King, Rt Hon Tom


Davis, David (Boothferry)
Kirkhope, Timothy


Day, Stephen
Knapman, Roger


Devlin, Tim
Knight, Mrs Angela (Erewash)


Dicks, Terry
Knight Greg (Derby N)


Dorrell, Rt Hon Stephen
Knight, Dame Jill (Bir'm E'st'n)


Douglas-Hamilton, Lord James
Knox, Sir David


Dover, Den
Kynoch, George (Kincardine)


Duncan, Alan
Lait Mrs Jacqui


Duncan-Smith, lain
Lang, Rt Hon lan


Dunn, Bob
Lawrence, Sir Ivan


Durant, Sir Anthony
Legg, Barry


Eggar, Rt Hon Tim
Lennox-Boyd, Sir Mark


Elletson, Harold
Lester, Jim (Broxtowe)


Emery, Rt Hon Sir Peter
Lidington, David


Evans, David (Welwyn Hatfield)
Lightbown, David


Evans, Jonathan (Brecon)
Lilley, Rt Hon Peter


Evans, Nigel (Ribble Valley)
Lloyd, Rt Hon Sir peter (Farehgm)


Evans, Roger (Monmouth)
Luff, Peter


Evennett, David
Lyell, Rt Hon Sir Nicholas


Faber, David
MacKay, Andrew


Fabricant, Michael
Maclean, David


Fenner, Dame Peggy
McLoughlin, Patrick


Field, Barry (Isle of Wight)
McNair-Wilson, Sir Patrick


Fishburn, Dudley
Maritland, Lady Olga


Forman, Nigel
Malone, Gerald


Forsyth, Rt Hon Michael (Stirling)



Forth, Eric
Mans, Keith


Fowler, Rt Hon Sir Norman
Marland, Paul


Fox, Dr Liam (Woodspring)
Marshall, John (Hendon S)


Fox, Sir Marcus (Shipley)
Martin, David (Portsmouth S)


Freeman, Rt Hon Roger
Mates, Michael


French, Douglas
Mellor, Rt Hon David


Fry, Sir Peter
Merchant, Piers


Gale, Roger
Mills, lain


Gallie, Phil
Mitchell, Andrew (Gedling)


Gardiner Sir George
Mitchell, Sir David (NW Hants)


Garnier, Edward
Moate, Sir Roger


Gillan, Cheryl
Monro, Sir Hector


Goodson-Wickes, Dr Charles
Montgomery, Sr Fergus


Gorst, Sir John
Needham, Rt Hon Richard


Greenway, Harry (Ealing N)
Nelson, Anthony


Greenway, John (Ryedale)
Neubert, Sir Michael


Griffiths, Peter (Portsmouth, N)
Newton, Rt Hon Tony


Hague, William
Nicholls, Patrick


Hamilton, Rt Hon Sir Archibald
Nicholson, David (Taunton)


Hamilton, Neil (Tatton)
Nicholson, Emma (Devon West)


Hampson, Dr Keith
Norris, Steve


Hannam, Sir John
Onslow, Rt Hon Sir Cranley


Haselhurst, Alan
Oppenheim, Phillip


Hawkins, Nick
Ottaway, Richard


Hawksley, Warren
Page, Richard


Hayes, Jerry
Paice, James


Heald, Oliver
Patnick, Sir Irvine


Heathcoat-Amory, David
Peacock, Mrs Elizabeth


Hendry, Charles
Pickles, Eric


Hill, James (Southampton Test)
Portillo, Rt Hon Michael


Hogg, Rt Hon Douglas (G'tham)
Powell, William (Corby)


Horam, John
Rathbone, Tim


Hordem, Rt Hon Sir Peter
Redwood, Rt Hon John


Howarth, Alan (Strat'rd-on-A)
Renton, Rt Hon Tim


Howell, Rt Hon David (G'dford)
Richards, Rod


Howell, Sir Ralph (North Norfolk)
Riddick, Graham


Hughes, Robert G (Harrow W)
Rifkind, Rt Hon Malcolm


Hunt, Rt Hon David (Wirral W)
Robathan, Andrew


Hunt, Sir John (Ravensbourne)
Roberts, Rt Hon Sir Wyn






Robertson, Raymond S. (Aberdeen South)
Taylor, John M (Solihull)



Temple-Morris, Peter


Robinson, Mark (Somerton)
Thomason, Roy


Roe, Mrs Marion (Broxbourne)
Thompson, Sir Donald (C'er V)


Rowe, Andrew (Mid Kent)
Thompson, Patrick (Norwich N)


Sackville, Tom
Thornton, Sir Malcolm


Sainsbury, Rt Hon Sir Timothy
Thumham, Peter


Scott, Rt Hon Sir Nicholas
Townend, John (Bridlington)


Shaw, David (Dover)
Townsend, Cyril D (Bexl'yh'th)


Shaw, Sir Giles (Pudsey)
Tracey, Richard


Shephard, Rt Hon Gillian
Tredinnick, David


Shepherd, Colin (Hereford)
Trend, Michael


Shepherd, Richard (Aldridge)
Trotter, Neville


Shersby, Michael
Twinn, Drlan


Sims, Roger
Vaughan, Sir Gerard


Skeet, Sir Trevor
Waldegrave, Rt Hon William


Smith, Tim (Beaconsfield)
Walden, George


Soames, Nicholas
Walker, Bill (N Tayside)


Spencer, Sir Derek
Waller, Gary


Spicer, Sir James (W Dorset)
Waterson, Nigel


Spicer, Michael (S Worcs)
Watts, John


Spink, Dr Robert
Whitney, Ray



Whittingdale, John


Spring, Richard
Widdecombe, Ann


Sproat, lain
Wilkinson, John


Squire, Robin (Hornchurch)
Willetts, David


Stanley, Rt Hon Sir John
Winterton, Nicholas (Macc'f'ld)


Steen, Anthony
Wolfson, Mark


Stephen, Michael
Wood, Timothy


Stem, Michael
Yeo, Tim


Stewart, Allan
Young, Rt Hon Sir George


Streeter, Gary



Sumberg, David
Tellers for the Noes:


Sweeney, Walter
Mr. Bowen Wells and


Sykes, John
Mr. Simon Burns.

Question accordingly negatived.

Railways (South Yorkshire)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]

Mr. Eric Illsley: I am grateful for this opportunity to raise the issue of the future funding of railways in South Yorkshire. The debate is opportune and timely. I hope that the House will allow me to speak for the bulk of the Adjournment debate and then allow my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) to say a few words at the end—of course, with the Minister's permission.
The issue of the funding of railway services supported by passenger transport authorities after the metropolitan railway grant expires in 1996 is a pressing one. The passenger transport authorities are in something of a vacuum when considering their budgets for 1996–97 and, of course, thereafter. The issue is not confined to South Yorkshire but affects all passenger transport executives and passenger transport authorities across the country, but, as my constituency is in South Yorkshire, I shall confine my remarks to that area.
The financial support for local railways dates back to the Transport Act 1968. Under section 20, formal, legal agreements were to be made between British Rail and the passenger transport executives. Those agreements supported local services which, as a consequence, have expanded since 1968. The total number of passengers carried on PTE-supported services is now double that carried by the former InterCity business unit of British Rail and is about three quarters of the number carried on the former Regional Railways, of which, of course, PTEs were a part.
Therefore, in the country as a whole, and in South Yorkshire in particular, these supported services are extremely important. I shall emphasise that by highlighting some of the statistics for South Yorkshire.
It is estimated that the number of passenger journeys is about 6.2 million, which means 115,000 supported trains each year. The supported route mileage is 102.5; 35 stations are supported on the lines; and there are 54 million supported passenger miles and 56 supported staff. It is easy to see that the 6.2 million passenger journeys are extremely important to South Yorkshire.
Those journeys cover routes such as Sheffield to Doncaster, Sheffield to Kiveton Park, Sheffield to Morthen, Sheffield to Barnsley—my constituency, of course—Barnsley to Penistone, the constituency of my hon. Friend the Member for Barnsley, West and Penistone, Barnsley to Darton, the routes from Doncaster to Kirk Sandall and Thorne going out to Scunthorpe, and from Doncaster to South Elmsall.
Those are obviously local routes in South Yorkshire, which involve Sheffield, Barnsley and Doncaster, and they are important for a number of reasons. Doncaster, Sheffield and Barnsley, in the South Yorkshire passenger transport area, are now the major centres of employment. Rail services at the appropriate times are essential to those areas.
Over the past 15 years—this has been well documented in other debates and I shall not rehearse the arguments—tens of thousands of jobs have been lost in the South Yorkshire area. In Sheffield, in the early 1980s, thousands


of jobs were lost in the steel industry. In Barnsley and Doncaster over the past few years, jobs have been lost in the coal industry.
Therefore, the rail routes are in areas of low economic activity. If those rail routes were not supported by Government grant, they would not be viable in the private sector; they would be run down or, at worst, removed entirely. Therefore, those people living in those areas would not have the benefit of available rail travel. Barnsley and Doncaster are major towns and Sheffield, of course, is a city. There is a great concern that some routes are likely to be lost in that area. Some of those smaller towns that I mentioned are not easily accessible via road, especially in winter time, and particularly Penistone, which is an outlying village in a high area relying on rail travel.
The funding arrangements continued under section 20, which was known as the bolt-on initiative, until the Railways Act 1993, when the privatisation of the railways brought a new system and new structures for railways in this country and, of course, a different funding mechanism. It was recognised immediately that the charges paid by the PTEs in support of local services would increase. In fact, they have not only increased, they have gone through the roof. The charges have increased quite dramatically.
As a consequence, the Government were obliged to introduce a support mechanism, which became known as the metropolitan railways grant. That was a one-off grant for two years in 1994-95 and 1995–96, and was designed to cover the increased charges caused by the loss of cross-subsidy and the transparency which was imposed on railway costs. The idea that charges would be levied for the usage of railways and to increase transparency—as the then Minister put it—to ensure that PTEs could see exactly what they were paying for was debated at length throughout the passage of the Railways Act.
The increases, which were listed by the Minister's predecessor, the right hon. Member for Kettering (Mr. Freeman) in a debate on 19 May 1994, were to reflect the full cost of privatisation, to ensure that there was transparency of Railtrack access charges, to reflect the rolling stock lease charges and to ensure that those charges covered the new investment, and to ensure a rate of return for Railtrack and for the rolling stock companies, which have become known as Roscos.
There was one interesting point in that debate, when the right hon. Member for Kettering said:
The expenditure covered by this grant"—
the metropolitan railways grant—
will fall outside the authorities' budget requirements,
the local authorities of Sheffield, Doncaster and Barnsley,
so it will not create any problems with regard to capping."—[Official Report, Fourth Standing Committee on Statutory Instruments, 19 May 1994; c. 5.]
I mention that because, only today, we have heard that two of the authorities involved in the debate—Sheffield and Barnsley—are subject to the capping arrangements announced by the Secretary of State today in a written answer.
I mentioned increased charges, and I shall run through a couple of them.
The increases in expenditure listed by South Yorkshire passenger transport executive are dramatic. Train maintenance, for example, has increased from £2.7 million to £4 million, and infrastructure charges from £1.8

million to £9.5 million, so there have been massive increases in the charges levied against the passenger transport executives. At the bottom of the balance sheet for the 1994–95 budget, a level of funding of about £6.6 million has now increased to about £17.2 million. Charges have increased by about 156 per cent.
That increase has been funded by the metropolitan railway grant. But what will happen for the 1996–97 financial year, when the grant will have expired? I understand that additional funding will probably be available—although the Minister has given no commitment, and I hope that he will be able to enlighten us this evening—but that it will be paid to individual local authorities through the revenue support grant.
The money will be hidden in the methodology of the standard spending assessments—a methodology that I have criticised since 1990, when it was first introduced. Only last year, after the system had been debated in the Chamber over three or four years, the arrangements covering my constituency of Barnsley were altered so that although my local authority's standard spending assessment has been increased, the capping level means that it can spend only 0.1 per cent. above its SSA, compared with an average for metropolitan authorities of 5 per cent. above SSA. The Minister will therefore immediately appreciate the difficulties that local authorities could find in trying to fund passenger transport executives and rail services through the revenue support grant.
As I have said, we are still waiting for confirmation of what funding there will be, what form it will take and what method will be used. There is a sense of urgency now, in that PTEs have to decide by the end of May whether to support local services, because they must give 12 months' notice if they intend to withdraw from funding any of them.
An added complication is the fact that, according to the franchising director, franchises are likely to extend for seven years. How can PTEs decide whether to support local rail services without knowing how the grant funding formula will operate, or what level of funding will be available? It is impossible for them to decide which course of action to choose.
Over the next few weeks, South Yorkshire passenger transport executive must decide whether to support the same services as before or to give the 12 months' notice of withdrawal from the scheme. In South Yorkshire, we now face the ludicrous prospect of losing rail services on uneconomic routes—perhaps running fewer trains, or even losing altogether whole routes that are essential for the areas concerned.
It is vital that the Minister give South Yorkshire passenger transport executive some assurances, either tonight or in the next week or so, about the future funding formula. Bearing in mind the Government's attitude to authorities such as Sheffield and Barnsley, which were mentioned today in connection with capping arrangements, I hope that the Minister will give some consideration to our views on funding through the RSG.
Finally, I shall quickly raise two other related issues—timetabling and the fixing of fares. The PTEs want to retain influence over timetabling. They are paying for the routes, and they want to ensure that services run at times appropriate to the locality. Government assurances, dating


back to 1993, have been given on that subject, but I understand that Strathclyde is now having difficulties involving timetabling.
As for the fixing of fares, on through routes there is likely to be cherry-picking by the larger services, which will be able to undercut the fares set by the PTEs.

Mr. Michael Clapham: I shall confine my remarks to the situation in my constituency. First, I am grateful to my hon. Friend the Member for Barnsley, Central (Mr. Illsley) for initiating the debate, and for his generosity in allowing me a few minutes to emphasise the need to ensure the continuity of adequate funding to keep the rail services in Barnsley, West and Penistone.
My constituency is next to that of my hon. Friend, but it covers an extensive geographical area from the west of Barnsley town up to the Pennines. The railway loops my constituency, and connects Barnsley with Sheffield on the one hand and with Huddersfield on the other. The Sheffield, Penistone and Huddersfield line is particularly famed because of the beautiful countryside through which it runs, and for the magnificent viaducts at Penistone and at Denby Dale, the latter of which is in the constituency of my hon. Friend the Member for Huddersfield (Mr. Sheerman).
There are two issues which are enormously important to the development of Barnsley and South Yorkshire. The first is the rail connection between the rural and urban parts of the region, which is essential for commuters. My constituency has 20-odd villages in a rural area, and that is the local dimension to the major issue. The transport system is essential for the link-up with the national transport system, and it is also enormously important for the economic regeneration of the former mining areas. Many former miners travel to work in Sheffield and Barnsley, and some travel even further afield.
The second issue is that rural services are most important for the development of the tourist trade in Barnsley. My constituency is rich in early industrial sites, which have been made accessible by the heritage trail. The railway links the old industrial villages such as Elsecar on the east side of my constituency with Silkstone in the mid-part of my constituency. Both villages have made important social and economic contributions to the United Kingdom's early industrialisation.
Those two points were emphasised by the local chamber of commerce when it gave evidence in a submission to the Transport Select Committee, which took evidence on "The Future of the Railways in Light of the Government's White Paper proposals" in 1993.
The South Yorkshire transport executive has opened some of the older stations on the route in my constituency—for example, at Silkstone and Dodworth. These allow people who are commuting from the villages and tourists travelling in the area to have access to the villages, because there is a link with the bus service.
What I have said to the Minister emphasises the importance of the railway services to my constituency. As my hon. Friend has said, the current financial situation relates to the revenue support grant and to the metropolitan railway grant. These last only until 1996, but

it has been estimated that the costs after privatisation will rise from £6.6 million to £17.1 million. That is an enormous increase, and we must bear in mind the fact that there will be no mechanism after April 1996 to continue grants.
I hope that, when the Minister comes to the Dispatch Box, he will assure us that adequate finance will continue after April 1996, so that rail services in my constituency can be maintained by the passenger transport executive.

The Minister for Railways and Roads (Mr. John Watts): I welcome the opportunity which this debate provides to provide some of the information which the hon. Members for Barnsley, Central (Mr. Illsley) and for Barnsley, West and Penistone (Mr. Clapham) have requested about the future funding of railway passenger services in South Yorkshire.
The hon. Member for Barnsley, Central acknowledged that the whole issue of future funding touches not just on South Yorkshire, but on all other PTEs in England and Scotland which support railway passenger services in their areas.
The PTAs are responsible for drawing up local public transport policies for the metropolitan areas outside London—six in England, and Strathclyde in Scotland. The membership is drawn from the constituent metropolitan district councils, and it is important that the body that sets the broad policy is made up of elected representatives of those constituent authorities to ensure local accountability for decisions taken, and to take into account the local needs that both hon. Members explained to the House.
The statutory powers for funding railway passenger services are set out in section 20 of the Transport Act 1968, which enables the PTEs to enter into agreements with British Rail to support railway passenger services. The PTEs contract individually with BR for the provision of the rail services in their areas. Central Government support to PTEs in respect of the net cost of the services has been channelled through the revenue support grant to the metropolitan district councils.
Before railway restructuring, PTE funding was provided solely through revenue support grant, and PTEs were charged by BR generally on a marginal cost basis for those services. Restructuring of the railways saw the introduction of a revised charging regime, involving the recovery of the full costs of access charges and rolling stock leasing charges. The full costs are much greater than the net costs that were borne previously. Without the full details of the prospective extra costs, it was not possible to feed an appropriate level of grant into the RSG process.
Consequently, to meet the extra costs facing PTEs arising from the change from marginal costs to full cost recovery, the Government introduced metropolitan railway grant as a transitional measure in 1994–95, to meet the funding gap between the bolt-on and the extra costs of the revised charging regime. I use the term "transitional" advisedly, because the Government have always seen MRG as a temporary measure.
The calculation of MRG takes as the starting point the services contracted for PTEs for 1993–94 and represents the difference between the costs of providing those services under the old marginal-cost basis and new full-cost basis. It is paid by my Department directly to English PTAs. Subject to Parliament, we also propose to pay MRG in 1995–96.


Consultation will shortly be under way on the proposed formula for MRG for 1995–96. We are aiming to send out the consultation document before Easter.
Given the temporary nature of MRG, we have been looking closely at the long-term funding for PTE rail services from 1996–97 onwards. To preserve the element of local flexibility inherent in the existing system, we are minded that funding should revert to channelling all support for PTE rail services through an enhanced RSG bolt-on.
The process of bedding down the new charging regime will be nearly completed this year, when finalised access costs for the period until 2001 will emerge from the regulator's review, and when rolling stock leasing charges are made known. That should enable the Government to enhance effectively the support for PTE rail passenger services through RSG, to reflect the net increase in the level of support required to maintain existing services in future years.
I am also aware of the concerns of the metropolitan district councils in respect of capping. We will seek, through the Department of the Environment, to take steps to ensure that the new arrangements for funding PTE rail services do not increase the likelihood of metropolitan districts being capped.
Our general approach on future funding is the subject of consultation with all the PTEs, and the Association of Metropolitan Authorities. We have sought the views of the PTEs on that approach, and look forward to seeing a constructive contribution on the way forward from the PTEs and the AMA.
The hon. Member for Barnsley, Central was concerned that the funding might be lost in the myriad other elements of revenue support grant. We also consider the maintenance of some transparency in the funding mechanism important, and intend that it should be covered as follows. The new bolt-on total will be published in the local government finance report, as at present, and will make the new totals clear to all passenger transport authorities and metropolitan district councils.
The underlying formula will continue to be discussed through the standard spending assessment sub-group, will be determined by Ministers, and will be made freely available to the local authority associations, PTAs and individual metropolitan district councils. The allocation of each metropolitan bolt-on to the constituent district councils will continue to be on the basis of total resident population. We shall be ready and willing to write to individual district councils to confirm their allocation of the bolt-on. We shall also point out that the bolt-on results in a corresponding increase in standard spending assessment, and therefore a corresponding increase in RSG for that authority.
In respect of how the additional funding will work through the system, the overall control total for PTE-supported railway passenger services will be set by my Department, subject to the 1995 public expenditure

survey determinations and the views of the Department of the Environment and, in the case of Strathclyde, the Scottish Office.
We see the overall control total for 1996–97 as reflecting such matters as the projected costs in 1996–97 of rolling stock leasing charges, train operating costs and track access charges. It will fall to PTEs to pay for the cost of any additional services that they may decide to introduce over and above those covered by 1995–96 support. The intention is to ensure that the support available in 1996–97 will be equivalent to the support available in 1995–96.
The provisional distribution formula—based largely on actuals—is intended to ensure, so far as is possible, that PTEs receive broadly the same funding to reflect the net increase in the support required to maintain existing services in future years. That current formula can be revised, if appropriate, to take account of the views of South Yorkshire PTA and PTE, and those of the other PTEs, PTAs and the AMA.
In the franchising process, the franchising director is required to give notice to the PTE of his intention to include, in the franchise agreement, provisions relating to the operation of any stations and light maintenance depots within the passenger transport area, and of his intention to issue an invitation to tender.
The PTE may respond to that notice within 60 days by submitting a statement which will, inter alia, specify the services in that area; the minimum level of quality of services so specified; and requirements with respect to the fares to be charged.
When such a statement has been submitted by the PTE, the franchise director will ensure that those services, and any minimum levels of quality or requirements with respect to fares, are included in the specification of the services in respect of which the invitation to tender is issued. Before entering into a franchise agreement, a PTE must obtain its PTA's approval of the proposed franchise agreement. The franchising director will specify any other services required for that franchise, and provide any payments under the franchise agreement in respect of such services.
I hope that what I have said makes the position clear in terms of the background, our intentions as regards future funding, and franchising. We want the PTEs to continue their valuable work in supporting railway passenger services in their areas, and to continue to play a key role in the new railway era. I hope that what I have said goes some way towards ensuring that they do, and that the consultations that are now under way, both about the future enhanced section 20 bolt-on and about MRG for the current year, will come to a speedy and successful conclusion. I recognise the importance to the PTAs and PTEs of putting an end to any uncertainty about the funding that will be available to them to carry out their important functions in future years.

Question put and agreed to.

Adjourned accordingly at twelve minutes to Eleven o'clock.